Press Alt + R to read the document text or Alt + P to download or print.

No preview available

The URL can be used to link to this page

Home My WebLink About20-21 Audit Report CITY OF McHENRY, ILLINOIS ANNUAL FINANCIAL REPORT APRIL 30, 2021 CITY OF McHENRY, ILLINOIS TABLE OF CONTENTS APRIL 30, 2021 PAGE INDEPENDENT AUDITOR’S REPORT 1 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTORL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 4 REQUIRED SUPPLEMENTARY INFORMATION Management’s Discussion and Analysis 6 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements Balance Sheet – Governmental Funds 15 Reconciliation of the Balance Sheet to the Statement of Net Position 16 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 18 Statement of Net Position – Proprietary Funds 19 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds 20 Statement of Cash Flows – Proprietary Funds 21 Statement of Fiduciary Net Position – Fiduciary Funds 22 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 23 Notes to Financial Statements 24 CITY OF McHENRY, ILLINOIS TABLE OF CONTENTS APRIL 30, 2021 PAGE REQUIRED SUPPLEMENTARY INFORMATION Illinois Municipal Retirement Fund – Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios 52 Illinois Municipal Retirement Fund – Schedule of Employer Contribution 53 Police Pension Plan – Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios 54 Police Pension Plan – Schedule of Employer Contribution 55 Other Post-Employment Benefit – Schedule of Changes in the Employer’s Total OPEB Liability and Related Ratios 56 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund 57 Notes to Required Supplementary Information 59 SUPPLEMENTAL FINANCIAL INFORMATION Combining Balance Sheet – General Fund 60 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – General Fund 61 Combining Balance Sheet – Other Governmental Funds 63 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – Other Governmental Funds 64 Combining Schedule of Net Position – Water and Sewer Funds 65 Combining Schedule of Revenues, Expenses, and Changes in Net Position – Water and Sewer Funds 66 Combining Schedule of Net Position – Internal Service Funds 67 Combining Schedule of Revenues, Expenses, and Changes in Net Position – Internal Service Funds 68 Combining Schedule of Net Position – Agency Funds 69 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Special Revenue Fund – Tax Increment Financing Fund 70 CITY OF McHENRY, ILLINOIS TABLE OF CONTENTS APRIL 30, 2021 PAGE ANNUAL FDERAL COMPLIANCE SECTION Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance in Accordance with the Uniform Guidance 71 Schedule of Expenditures of Federal Awards 73 Note to the Schedule of Expenditures of Federal Awards 74 Schedule of Findings and Questioned Costs 75 Summary Schedule of Prior Audit Findings 76 Page 1 INDEPENDENT AUDITOR’S REPORT To the Mayor and City Council Members City of McHenry, Illinois Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of as of and for the year ended April 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of McHenry as of April 30, 2021, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note 21 to the financial statements, the City implemented GASB Statement No. 84, Fiduciary Activities. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The supplemental information as listed in the table of contents and the Schedule of Expenditures of Federal Awards, as required by the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplemental information and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental information and the Schedule of Expenditures of Federal Awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Page 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 14, 2021 on our consideration of City of McHenry’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of McHenry’s internal control over financial reporting and compliance. EDER, CASELLA & CO. Certified Public Accountants McHenry, Illinois October 14, 2021 Page 4 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Mayor and City Council Members City of McHenry, Illinois We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of City of McHenry as of and for the year ended April 30, 2021, and the related notes to the financial statements which collectively comprise City of McHenry’s basic financial statements, and have issued our report thereon dated October 14, 2021. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of McHenry’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of McHenry’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of McHenry’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of McHenry’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and Page 5 material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. EDER, CASELLA & CO. Certified Public Accountants McHenry, Illinois October 14, 2021 REQUIRED SUPPLEMENTARY INFORMATION Page 6 CITY OF McHENRY, ILLINOIS MANAGEMENT’S DISCUSSION AND ANALYSIS April 30, 2021 As management of City of McHenry (City), we offer readers of the City’s statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended April 30, 2021. We encourage readers to consider the information presented here in conjunction with additional information found in the notes to the financial statements. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of resources of the City exceed its liabilities and deferred inflows of resources at April 30, 2021 by $126,492,926 (total net position).  The City’s total net position increased by $14,213,787 from current year activities.  At April 30, 2021, the City’s governmental funds reported combined ending fund balances of $17,115,309, an increase from current year activities of $4,232,607.  At April 30, 2021, the unassigned fund balance for the General Fund was $9,947,840, or 20% of total General Fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Both perspectives (government-wide and fund level financial statements) allow the user to address relevant questions, broaden a basis for comparison (year to year or government to government) and enhance the City’s accountability. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private business. The Statement of Net Position presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference amongst those being reported as net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating when comparing year to year results. The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general office, public safety, public works, and parks and recreation. The business-type activities of the City include a water and sewer division. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local Page 7 governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government- wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 13 individual governmental funds. Information is presented separately in the governmental fund Balance Sheet and in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund which is considered to be a major fund. Data from the other twelve governmental funds are combined into a single, aggregated presentation. The other twelve funds include Pageant, Audit, Recreation Center, Capital Improvements, Capital Equipment, Debt Service, Motor Fuel Tax, Municipal Motor Fuel Tax, Developer Donations, Tax Increment Financing, and two Special Service Areas. Proprietary Funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for the Water and Sewer Division. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its employee insurance, risk management, and information technology. Because these services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer functions. Internal service funds are combined into a single, aggregate presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City’s fiduciary funds include the Police Pension Trust Fund and two Agency Funds. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s appropriation to actual for the General Fund. Page 8 GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $126,492,926 at April 30, 2021. By far, the largest portion of the City’s net position, 104%, reflects its net investment in capital assets (e.g., land, construction in progress, buildings, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 4/30/2021 4/30/2020 4/30/2021 4/30/2020 4/30/2021 4/30/2020 Assets Current and Other Assets 31,058,546$ 21,558,407$ 10,302,358$ 9,625,741$ 41,360,904$ 31,184,148$ Capital Assets 93,079,776 89,464,420 79,117,145 77,451,024 172,196,921 166,915,444 Total Assets 124,138,322$ 111,022,827$ 89,419,503$ 87,076,765$ 213,557,825$ 198,099,592$ Deferred Outflows of Resources 5,043,989$ 8,560,289$ 663,123$ 1,094,478$ 5,707,112$ 9,654,767$ Liabilities Long-Term Liabilities Outstanding 37,433,777$ 41,978,872$ 35,123,153$ 36,972,448$ 72,556,930$ 78,951,320$ Other Liabilities 2,551,356 2,425,836 576,039 933,679 3,127,395 3,359,515 Total Liabilities 39,985,133$ 44,404,708$ 35,699,192$ 37,906,127$ 75,684,325$ 82,310,835$ Deferred Inflows of Resources 15,996,392$ 12,087,703$ 1,091,294$ 1,076,682$ 17,087,686$ 13,164,385$ Net Position Net Investment in Capital Assets 87,364,529$ 83,665,808$ 44,729,867$ 41,979,946$ 132,094,396$ 125,645,754$ Restricted 4,551,421 1,816,523 - - 4,551,421 1,816,523 Unrestricted (18,715,164) (22,391,626) 8,562,273 7,208,488 (10,152,891) (15,183,138) Total Net Position 73,200,786$ 63,090,705$ 53,292,140$ 49,188,434$ 126,492,926$ 112,279,139$ City of McHenry's Statement of Net Position TotalBusiness-Type ActivitiesGovernmental Activities An additional portion of the City’s net position, 4%, represents resources that are subject to external restrictions on how they may be used (e.g. Highways and Streets, Capital Projects, Police Pension and Special Service Areas). The remaining balance of unrestricted net position was a deficit in the current year of $10,152,891. Governmental Activities. Governmental activities increased the City’s net position by $10,110,081. Key differences from the prior year are as follows: Page 9 FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020 Revenues Program Revenues Charges for Services 6,051,369$ 6,270,895$ 8,823,831$ 9,225,491$ 14,875,200$ 15,496,386$ Operating Grants and Contributions 1,374,741 517,577 - - 1,374,741 517,577 Capital Grants and Contributions 5,466,135 694,426 4,874,766 452,750 10,340,901 1,147,176 General Revenues Property Taxes 5,638,068 5,629,639 - - 5,638,068 5,629,639 Sales Taxes 11,727,968 10,459,369 - - 11,727,968 10,459,369 Other Taxes 4,960,587 4,209,183 - - 4,960,587 4,209,183 Other 23,125 226,959 19,764 84,792 42,889 311,751 Total Revenues 35,241,993$ 28,008,048$ 13,718,361$ 9,763,033$ 48,960,354$ 37,771,081$ Expenses General Office 4,421,135$ 5,103,092$ -$ -$ 4,421,135$ 5,103,092$ Public Safety 11,376,829 14,176,025 - - 11,376,829 14,176,025 Public Works 5,246,147 6,359,880 - - 5,246,147 6,359,880 Parks and Recreation 3,277,676 4,025,167 - - 3,277,676 4,025,167 Interest and Fees 708,614 161,094 - - 708,614 161,094 Depreciation 223,641 210,024 - - 223,641 210,024 Water - - 2,056,292 1,947,255 2,056,292 1,947,255 Sewer - - 6,476,625 4,406,916 6,476,625 4,406,916 Utility Work - - 997,958 1,137,143 997,958 1,137,143 Total Expenses 25,254,042$ 30,035,282$ 9,530,875$ 7,491,314$ 34,784,917$ 37,526,596$ Increase/(Decrease) in Net Position Before Transfers 9,987,951$ (2,027,234)$ 4,187,486$ 2,271,719$ 14,175,437$ 244,485$ Transfers 93,780 95,602 (93,780) (95,602) - - Gain on Sale of Capital Assets 28,350 21,576 10,000 5,676 38,350 27,252 Increase/(Decrease) in Net Position 10,110,081$ (1,910,056)$ 4,103,706$ 2,181,793$ 14,213,787$ 271,737$ Net Position - Beginning of Year 63,090,705 65,000,761 49,188,434 47,006,641 112,279,139 112,007,402 Net Position - End of Year 73,200,786$ 63,090,705$ 53,292,140$ 49,188,434$ 126,492,926$ 112,279,139$ City of McHenry's Change in Net Position Governmental Activities Business-Type Activities Total Revenues increased in the current year due to an increase in capital grants and contributions attributable to Public Works. There was also an increase in Operating grants, which was mainly due to the receipt of the CURES Grant, which was federal funding established via the CARES Act. Sales taxes also rebounded in the current year after a decline at the start of the COVID pandemic in the prior year. Expenses decreased mainly due to decreased in the expenses related to the Police Pension and IMRF Pension liabilities in the current year. Business-Type Activities. Business-type activities increased the City’s net position by $4,103,706. Revenues for Business-Type Activities also increased in the current year due to an increase in capital grants and contributions. Expenses increased significantly for Sewer due to a significant loss related to the disposal of the old plant with the new Sewer Consolidation project being completed and put into service in the current year. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s Page 10 financing requirements. In particular, unassigned fund balance may serve as a useful measure of the City’s net resources available for spending at the end of the fiscal year. At April 30, 2021, the City’s governmental funds reported combined ending fund balances of $17,115,309, an increase of $4,232,607 in comparison with the prior year. Approximately 57% of this total amount constitutes unassigned fund balance, which is available for spending at the City’s discretion. Of the remaining fund balance, 24% constitutes assigned fund balance, with the remainder of the fund balance restricted to indicate that it is not available for new spending because it has already been committed for specific restricted purposes or is nonspendable. The General Fund is the chief operating fund of the City. At April 30, 2021, the fund balance of the General Fund was $12,140,533, of which $9,947,840 is unassigned. As a measure of the General Fund’s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 20% of total General Fund expenditures. The General Fund’s fund balance increased by $3,173,791 during the year ended April 30, 2021.This was mainly due to increases in state sales tax and state income taxes. The increase was due to a rebound in the current year, as the COVID pandemic affected prior year collections. There was also an increase in Operating grants, which was mainly due to the receipt of the CURES Grant, which was federal funding established via the CARES Act. Other significant highlights in the governmental funds for the year ended April 30, 2021 are outlined below:  Debt service expenses of $1,400,900 were paid to meet the debt service requirements of the City.  Other governmental funds show a total increase in fund balance of $1,058,816. Proprietary Funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Fiduciary Funds (Police Pension and Agency Funds). At April 30, 2021, the Police Pension Fund’s net position amounted to $61,710,980. Additions exceeded deductions during the year, resulting in an increase of $34,055,006 in net position. The increase was largely inflated this year due to employer contributions increasing significantly. This was the result of the current year bond issuance in the General Fund, which was used to fund the Police Pension Liability, which is now an asset as a result of this year’s contributions. GENERAL FUND BUDGETARY HIGHLIGHTS The General Fund actual revenue exceeded budgeted revenue by $2,146,996. This difference was primarily due to more than expected revenue from state sales and income taxes, and receipt of the CURES grant. Actual expenditures exceeded budgeted expenditures by $23,251,432. The increase was attributable to a new bond issued to the City for the Police Pension. The proceeds from this bond were contributed to the Police Pension. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. The City’s investment in capital assets for its governmental and business-type activities as of April 30, 2021 amounts to $172,196,921 (net of accumulated depreciation). This investment includes land, land improvements, art and historical treasures, intangibles, construction in progress, buildings, vehicles, systems and equipment, and infrastructure. Page 11 4/30/2021 4/30/2020 4/30/2021 4/30/2020 4/30/2021 4/30/2020 Land 42,130,875$ 42,130,875$ 2,208,117$ 2,208,117$ 44,338,992$ 44,338,992$ Land Improvements 2,270,560 2,316,574 - - 2,270,560 2,316,574 Art and Historical Treasures 1,658,927 1,658,927 - - 1,658,927 1,658,927 Intangibles 300,000 300,000 - - 300,000 300,000 Construction in Progress 1,189,805 556,869 38,619 36,082,114 1,228,424 36,638,983 Buildings 12,570,264 12,565,265 388,139 440,066 12,958,403 13,005,331 Vehicles 1,672,496 853,768 780,920 846,065 2,453,416 1,699,833 Systems and Equipment 1,650,507 1,642,756 75,701,350 37,874,662 77,351,857 39,517,418 Infrastructure 29,636,342 27,439,386 - - 29,636,342 27,439,386 Total 93,079,776$ 89,464,420$ 79,117,145$ 77,451,024$ 172,196,921$ 166,915,444$ City of McHenry's Capital Assets (net of depreciation) Governmental Activities Business-Type Activities Total Major capital asset events during the year ended April 30, 2021 included the following:  Developer Donated public improvements for watermains and sanitary sewers, as well as completed roads totaling $8,104,469.  The Sewer Consolidation Project was completed and put into service in the current year, for a total amount of $36,600,918, of which a majority of that amount was included in Construction in Progress in the prior year.  The purchase of three vehicles for Parks and Recreation totaling $118,127.  The purchase of eight new police vehicles totaling $366,471.  The purchase of six new vehicles for Public Works totaling $533,059. For further information, please see Note 4. Long-Term Debt. At April 30, 2021, the City had total bonded debt outstanding of $33,160,000, all of which is backed by the full faith and credit of the City. 4/30/2021 4/30/2020 4/30/2021 4/30/2020 4/30/2021 4/30/2020 General Obligation Bonds 28,810,000$ 5,495,000$ 4,350,000$ 5,095,000$ 33,160,000$ 10,590,000$ IEPA Revolving Loan Fund - - 29,663,434 30,376,988 29,663,434 30,376,988 Notes Payable 1,121,882 248,616 - - 1,121,882 248,616 Bond Premium 48,926 57,304 373,844 6,315 422,770 63,619 Bond Discount (560) (2,308) - (7,227) (560) (9,535) Total 29,980,248$ 5,798,612$ 34,387,278$ 35,471,076$ 64,367,526$ 41,269,688$ City of McHenry's Outstanding Debt Governmental Activities Business-Type Activities Total Additional information on the City’s long-term debt can be found in Note 5. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES The City has a diversified economy with the manufacturing and health fields being its primary base. McHenry is among the State’s fastest growing communities with the official population increasing from 16,177 in 1990 to 26,992 in 2010. In addition, the City experienced significant growth in the retail, office, and industrial space and a downtown revitalization plan has spurred residential and commercial development in the Downtown TIF District. The City’s economic conditions are as follows:  The average unemployment rate for McHenry County in 2020 was 8.4 percent, which is 154.5 percent higher than a year ago. This is lower than the State’s average unemployment rate of 9.5 percent.  Inflation in the area compares to the national consumer price index. Similar to a nationwide trend, residential growth in the City has slowed, but has been increasing over the last few years. The number of single family residential building permits issued by the City has decreased from 139 in 2007 to 72 in 2019 and 85 in 2020. However, this is an improvement as there were only 8 in 2016 and 36 in 2018. Page 12 The total value of all commercial and residential improvements and new permits increased from $15.2 million in 2012 to $51.1 million in 2019, but is down to $22.2 million in 2020. Development and adoption of the 2021/22 budget was premised on providing core municipal services while having an operationally balanced budget. It was expected there was going to be a volatile economic forecast when the pandemic began, but the City is fortunate to be in a favorable financial situation because of rebounding revenues and controlled operating expenses. Property tax revenues have been held flat or decreased since 2010 and EAV values have increased slightly causing the City’s tax rate to decrease from $0.658494 in 2019 to $0.620882 in 2020. In April 2021, the City Council approved the proposed fiscal year 2021/22 General Fund budget increasing the prior year’s budget by $33,909. These increases were primarily due to capital outlay expenses. In the last few years, capital expenditures have been funded with Fund Balance Reserves which have been built up due to cost reduction measures necessary to adopt a balanced budget in the past years as well as rebounding state shared revenues. Management is still closely monitoring revenues as well as expenses for any changes due to the pandemic. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: City of McHenry, 333 South Green St., McHenry, Illinois, 60050. BASIC FINANCIAL STATEMENTS Governmental Business-Type Activities Activities Total ASSETS Cash and Cash Equivalents 14,102,734$ 7,066,045$ 21,168,779$ Deposit with Paying Agent 32,870 - 32,870 Investments 774,276 1,269,479 2,043,755 Prepaid Items 107,263 36,369 143,632 Inventory 84,000 - 84,000 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 759,394 564,531 1,323,925 Accounts Receivable - Unbilled 199,673 740,240 939,913 Property Taxes 5,588,214 - 5,588,214 Accrued Interest 1,725 2,980 4,705 Due from Other Governmental Units 3,917,205 622,714 4,539,919 Cable Franchise Fee Receivable 124,721 - 124,721 Police Pension Asset 5,366,471 - 5,366,471 Capital Assets Land, Construction in Progress, and Other Non-Depreciable Assets 45,279,607 2,246,736 47,526,343 Other Capital Assets, Net of Depreciation 47,800,169 76,870,409 124,670,578 TOTAL ASSETS 124,138,322$ 89,419,503$ 213,557,825$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 1,557,489$ 555,480$ 2,112,969$ Pension Expense/Revenue - Police Pension 1,641,205 - 1,641,205 OPEB Expense/Revenue 1,845,295 107,643 1,952,938 TOTAL DEFERRED OUTFLOWS OF RESOURCES 5,043,989$ 663,123$ 5,707,112$ LIABILITIES Accounts Payable and Accrued Expenses 1,313,110$ 351,602$ 1,664,712$ Security Deposits Held - 3,000 3,000 Due to Other Governmental Units 157,169 - 157,169 Due to Other Funds 147,287 (146,869) 418 Unearned Revenue 648,877 96,675 745,552 Accrued Interest 284,913 271,631 556,544 Non-Current Liabilities Due Within One Year 1,913,901 1,882,479 3,796,380 Due in More Than One Year 35,519,876 33,240,674 68,760,550 TOTAL LIABILITIES 39,985,133$ 35,699,192$ 75,684,325$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 5,588,214$ -$ 5,588,214$ Unavailable Revenue - State Taxes 107,578 - 107,578 Unavailable Revenue - Rent 2,400 - 2,400 Pension Expense/Revenue - IMRF 2,732,373 974,505 3,706,878 Pension Expense/Revenue - Police Pension 5,563,731 - 5,563,731 OPEB Expense/Revenue 2,002,096 116,789 2,118,885 TOTAL DEFERRED INFLOWS OF RESOURCES 15,996,392$ 1,091,294$ 17,087,686$ NET POSITION Net Investment in Capital Assets 87,364,529$ 44,729,867$ 132,094,396$ Restricted for: Public Safety 1,443,945 - 1,443,945 Highways and Streets 1,676,665 - 1,676,665 Capital Projects 675,404 - 675,404 Tax Increment Financing 755,407 - 755,407 Unrestricted/(Deficit)(18,715,164) 8,562,273 (10,152,891) TOTAL NET POSITION 73,200,786$ 53,292,140$ 126,492,926$ APRIL 30, 2021 CITY OF MCHENRY, ILLINOIS STATEMENT OF NET POSITION GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 13 The Notes to Financial Statements are an integral part of this statement. Operating Capital Charges for Grants and Grants and Governmental Business-Type Expenses Services Contributions Contributions Activities Activities Total Functions/Programs Governmental Activities General Office 4,421,135$ 4,998,487$ -$ 321,054$ 898,406$ -$ 898,406$ Public Safety 11,376,829 589,672 - - (10,787,157) - (10,787,157) Public Works 5,246,147 249,361 1,374,741 5,145,081 1,523,036 - 1,523,036 Parks and Recreation 3,277,676 213,849 - - (3,063,827) - (3,063,827) Interest and Fees on Long-Term Debt 708,614 - - - (708,614) - (708,614) Depreciation - Unallocated 223,641 - - - (223,641) - (223,641) 25,254,042$ 6,051,369$ 1,374,741$ 5,466,135$ (12,361,797)$ -$ (12,361,797)$ Business-Type Activities Water 2,056,292$ 2,855,501$ -$ 3,129,766$ -$ 3,928,975$ 3,928,975$ Sewer 6,476,625 5,968,330 - 1,745,000 - 1,236,705 1,236,705 Utility Work 997,958 - - - - (997,958) (997,958) 9,530,875$ 8,823,831$ -$ 4,874,766$ -$ 4,167,722$ 4,167,722$ Total Primary Government 34,784,917$ 14,875,200$ 1,374,741$ 10,340,901$ (12,361,797)$ 4,167,722$ (8,194,075)$ General Revenues Taxes Property Tax, Levied for General Purposes 5,638,068$ -$ 5,638,068$ State Sales Tax 11,727,968 - 11,727,968 State Income Tax 3,276,353 - 3,276,353 State Motor Fuel Tax 1,238,521 - 1,238,521 Other Taxes 445,713 - 445,713 Unrestricted Investment Earnings 19,525 12,510 32,035 Gain on Sale of Capital Assets 28,350 10,000 38,350 Miscellaneous 3,600 7,254 10,854 Transfers 93,780 (93,780) - Total General Revenues and Transfers 22,471,878$ (64,016)$ 22,407,862$ Change in Net Position 10,110,081$ 4,103,706$ 14,213,787$ Net Position - May 1, 2020 63,090,705 49,188,434 112,279,139 Net Position - April 30, 2021 73,200,786$ 53,292,140$ 126,492,926$ CITY OF MCHENRY, ILLINOIS GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED APRIL 30, 2021 Net (Expense) Revenue and Changes in Net PositionProgram Revenues Page 14 The Notes to Financial Statements are an integral part of this statement. Other Total General Governmental Governmental Fund Funds Funds ASSETS Cash and Cash Equivalents 9,204,207$ 4,245,419$ 13,449,626$ Deposit with Paying Agent - 32,870 32,870 Investments 183,168 582,839 766,007 Prepaid Items 35,447 - 35,447 Inventory - 84,000 84,000 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 746,566 12,079 758,645 Accounts Receivable - Unbilled 159,777 37,882 197,659 Property Taxes 4,865,646 722,568 5,588,214 Accrued Interest 985 730 1,715 Due from Other Governmental Units 3,495,008 422,197 3,917,205 Cable Franchise Fee Receivable 124,721 - 124,721 TOTAL ASSETS 18,815,525$ 6,140,584$ 24,956,109$ LIABILITIES Accounts Payable and Accrued Expenses 1,019,283$ 255,942$ 1,275,225$ Due to Other Governmental Units 79,849 77,320 157,169 Due to Other Funds 147,287 - 147,287 Unearned Revenue 562,927 - 562,927 TOTAL LIABILITIES 1,809,346$ 333,262$ 2,142,608$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 4,865,646$ 722,568$ 5,588,214$ Unavailable Revenue - State Taxes - 107,578 107,578 Unavailable Revenue - Rent - 2,400 2,400 TOTAL DEFERRED INFLOWS OF RESOURCES 4,865,646$ 832,546$ 5,698,192$ FUND BALANCES Nonspendable 35,447$ 84,000$ 119,447$ Restricted for: Capital Projects - 675,404 675,404 Highways and Streets - 1,676,665 1,676,665 Tax Increment Financing - 755,407 755,407 Assigned for: Alarm 870,025 - 870,025 Audit - 4,620 4,620 Tourism 129,879 - 129,879 Band 24,645 - 24,645 Highways and Streets - 869,823 869,823 Capital Projects 823,039 886,002 1,709,041 Revolving Loan 301,018 - 301,018 Civil Defense 8,640 - 8,640 Parks and Recreation - 238,826 238,826 Unassigned 9,947,840 (215,971) 9,731,869 TOTAL FUND BALANCES 12,140,533$ 4,974,776$ 17,115,309$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 18,815,525$ 6,140,584$ 24,956,109$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS APRIL 30, 2021 Page 15 The Notes to Financial Statements are an integral part of this statement. Total Fund Balances - Governmental Funds 17,115,309$ Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Capital Assets, net of accumulated depreciation 93,079,776 Deferred charges and credits for debt issue discounts or premiums and other debt issue costs are not financial resources and therefore are not reported in the funds. Bond Discounts, net of related amortization 560 Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Bonds and Notes Payable (29,931,882)$ Bond Premiums, net of related amortization (48,925) Accrued Interest on Long-Term Debt, net of receivable (284,913) Compensated Absences (590,747) OPEB Liability (5,445,540) Net Pension Asset/(Liability) - IMRF (1,417,243) Net Pension Asset/(Liability) - Police Pension 5,366,471 (32,352,779) Deferred pension and OPEB costs in governmental activities are not financial resources and therefore are not reported in the funds. Pension Deferred Outflows - Police Pension 1,641,205$ Pension Deferred Outflows - IMRF 1,557,489 Pension Deferred Inflows - Police Pension (5,563,731) Pension Deferred Inflow - IMRF (2,732,373) OPEB Deferred Outflows 1,845,295 OPEB Deferred Inflows (2,002,096) (5,254,211) Internal service funds are used by management to charge the cost of certain activities, such as insurance and information technology, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the government-wide Statement of Net Position (net of amount allocated to business-type activities). Internal service fund balances are not included in other reconciling items above except for long term debt and long term pension items. Current Assets 735,966$ Current Liabilities (123,835) 612,131 Net Position of Governmental Activities 73,200,786$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION APRIL 30, 2021 Page 16 The Notes to Financial Statements are an integral part of this statement. Other Total General Governmental Governmental Fund Funds Funds REVENUES Local Taxes Property Tax 4,940,218$ 697,850$ 5,638,068$ Intergovernmental State Sales Tax 11,727,968 - 11,727,968 State Income Tax 3,276,353 - 3,276,353 State Replacement Tax 78,561 - 78,561 State Motor Fuel Tax - 1,238,521 1,238,521 State Pull Tab/Games Tax 893 - 893 Inter Track Wagering Tax 16,080 - 16,080 State Telecommunications Tax 244,938 - 244,938 State Grants - 1,037,679 1,037,679 Cannabis Use Tax 23,883 - 23,883 Federal Grants 1,354,713 70,933 1,425,646 Bond Interest Rebates - 3,688 3,688 Other Local Sources Hotel/Motel Tax 81,358 - 81,358 Franchise Fees 360,325 - 360,325 Licenses and Permits 957,091 - 957,091 Fines and Forfeitures 370,906 - 370,906 Charges for Services 1,025,406 351,397 1,376,803 Interest 16,097 6,144 22,241 Local Grants 31,239 - 31,239 Miscellaneous Rent 18,694 43,147 61,841 Royalties 175,000 - 175,000 Donations 750 320,304 321,054 Annexation Fees 249,361 - 249,361 Reimbursements 2,347,323 111,632 2,458,955 Other Miscellaneous 2,367 38,720 41,087 27,299,524$ 3,920,015$ 31,219,539$ EXPENDITURES Current General Office 4,380,027$ 61,706$ 4,441,733$ Public Safety 36,920,124 - 36,920,124 Public Works 3,355,377 140,108 3,495,485 Parks and Recreation 2,173,581 677,576 2,851,157 Capital Outlay 1,744,151 1,313,604 3,057,755 Debt Service Principal 303,553 950,000 1,253,553 Interest and Fees 8,235 139,112 147,347 48,885,048$ 3,282,106$ 52,167,154$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES (21,585,524)$ 637,909$ (20,947,615)$ OTHER FINANCING SOURCES/(USES) Transfers (327,127)$ 420,907$ 93,780$ Bond Proceeds 24,265,000 - 24,265,000 Bond Issuance Costs (335,432) - (335,432) Proceeds from Loan 1,128,524 - 1,128,524 Sale of City Property 28,350 - 28,350 24,759,315$ 420,907$ 25,180,222$ NET CHANGE IN FUND BALANCES 3,173,791$ 1,058,816$ 4,232,607$ FUND BALANCES - MAY 1, 2020 8,966,742 3,915,960 12,882,702 FUND BALANCES - APRIL 30, 2021 12,140,533$ 4,974,776$ 17,115,309$ FOR THE YEAR ENDED APRIL 30, 2021 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Page 17 The Notes to Financial Statements are an integral part of this statement. Net Change in Fund Balances - Total Governmental Funds 4,232,607$ Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeds depreciation expense in the current period. Depreciation Expense (3,113,891)$ Capital Outlays 2,566,117 (547,774) In the Statement of Activities, only the gain or loss on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the undepreciated balance of the capital assets sold. Proceeds from Sale of Capital Assets (28,350)$ Gain/(Loss) on Sale of Capital Assets 28,350 - Donated capital assets used in governmental activities are not current financial resources and therefore are not reported as revenue in the governmental funds.4,025,258 Long-term debt proceeds provide current financial resources to governmental funds and are therefore shown as revenue in the Statement of Revenues, Expenditures, and Changes in Fund Balance, but issuing debt increases long-term liabilities in the Statement of Net Position and is therefore not reported in the Statement of Activities. Bond Proceeds (24,265,000)$ Note Payable Proceeds (1,128,524) (25,393,524) Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrued Interest on Long-Term Debt (232,466)$ Accrued Interest Rebate (2,716) Bond Discount - Amortization (1,748) Bond Premium - Amortization 8,378 Pension Expense (378,393) OPEB Expense (165,637) Compensated Absences (1,401) (773,983) Employer Pension and OPEB Contributions are expensed in the fund financial statements but are treated as a reduction in the Net Pension Liability on the government-wide financial statements. Pension Employer Contributions - IMRF 820,741$ Pension Employer Contributions - Police Pension 26,150,315 OPEB Employer Contributions 202,490 27,173,546 Repayment of long-term debt requires the use of current financial resources of governmental funds and is therefore shown as an expenditure in the Statement of Revenues, Expenditures, and Changes in Fund Balances, but the repayment reduces long-term liabilities in the Statement of Net Position and is therefore not reported in the Statement of Activities. Repayment of Long-Term Debt 1,253,553 Internal service funds are used by management to charge the costs of certain activities, such as insurance and information technology, to individual funds. The net revenue of the internal service funds is reported with governmental activities in the government-wide Statement of Activities (net of amount allocated to business-type activities). Change in Net Position 92,316$ Pension Expense - IMRF (included in Pension - IMRF Expense Above)1,897 OPEB Expense (included in OPEB Expense Above)578 OPEB Employer Contributions (included in OPEB Employer Contributions Above)(705) Depreciation Expense (included in Change in Net Position above)46,312 140,398 Change in Net Position of Governmental Activities 10,110,081$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED APRIL 30, 2021 CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Page 18 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds ASSETS Current Assets Cash and Cash Equivalents 7,066,045$ 653,108$ Investments 1,269,479 8,269 Prepaid Items 36,369 71,816 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 564,531 749 Accounts Receivable - Unbilled 740,240 2,014 Accrued Interest 2,980 10 Due from Other Governmental Units 622,714 - Due from Other Funds 146,869 - 10,449,227$ 735,966$ Non-Current Assets Capital Assets Land 2,208,117$ -$ Buildings 2,736,098 - Systems and Equipment 109,330,726 660,219 Vehicles 1,855,839 - Construction in Progress 38,619 - Less: Accumulated Depreciation (37,052,254) (445,580) 79,117,145$ 214,639$ TOTAL ASSETS 89,566,372$ 950,605$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 555,480$ 32,949$ OPEB Expense/Revenue 107,643 6,422 TOTAL DEFERRED OUTFLOWS OF RESOURCES 663,123$ 39,371$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 351,602$ 37,885$ Security Deposits Held 3,000 - Unearned Revenue 96,675 85,950 Accrued Interest 271,631 - IEPA Loan Payable - Current 1,480,962 - Bonds Payable - Current 401,517 - Lease Payable - Current - 24,103 2,605,387$ 147,938$ Non-Current Liabilities Compensated Absences 102,097$ 5,705$ IMRF Net Pension Liability 361,888 86,905 Total OPEB Liability 271,890 22,579 IEPA Loan Payable (Net of Current Portion Shown Above)28,182,472 - Bonds Payable (Net of Current Portion Shown Above)4,322,327 - Lease Payable (Net of Current Portion Shown Above)- 24,104 33,240,674$ 139,293$ TOTAL LIABILITIES 35,846,061$ 287,231$ DEFERRED INFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 974,505$ 57,805$ OPEB Expense/Revenue 116,789 6,970 TOTAL DEFERRED INFLOWS OF RESOURCES 1,091,294$ 64,775$ NET POSITION Net Investment in Capital Assets 44,729,867$ 166,432$ Unrestricted/(Deficit)8,562,273 471,538 TOTAL NET POSITION 53,292,140$ 637,970$ APRIL 30, 2021 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF NET POSITION PROPRIETARY FUNDS Page 19 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds OPERATING REVENUES Charges for Services Customer Fees 5,525,689$ -$ Capital Fees 403,444 - Debt Service Fees 2,667,070 - Penalties 98,149 - Water Meter Sales 37,025 - Other 6,810 - Internal Service Funds - 4,978,564 8,738,187$ 4,978,564$ OPERATING EXPENSES Water Department Personnel Salaries 509,026$ -$ Miscellaneous Personnel Expenses 164,615 - Other Operating Expenses 755,831 - Depreciation 588,751 - Sewer Department Personnel Salaries 724,839 - Miscellaneous Personnel Expenses 276,841 - Other Operating Expenses 1,763,763 - Depreciation 1,704,349 - Utility Work Department Personnel Salaries 655,726 - Miscellaneous Personnel Expenses 263,391 - Other Operating Expenses 78,841 - Internal Service Funds Personnel Salaries - 158,902 Miscellaneous Personnel Expenses - 3,462,191 Other Operating Expenses - 1,218,947 Depreciation - 46,312 7,485,973$ 4,886,352$ OPERATING INCOME/(LOSS)1,252,214$ 92,212$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 12,510$ 104$ Rental Income 46,352 - Grant Income 795,556 - Interest Rebate Income 7,254 - Interest and Fees (741,570) - Bond Issuance Costs (54,046) - Amortization 39,292 - Gain/(Loss) on Sale of Fixed Asset (1,239,286) - Donated Public Improvements - Water 2,334,210 - Donated Public Improvements - Sewer 1,745,000 - 2,945,272$ 104$ INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 4,197,486$ 92,316$ TRANSFERS (TO)/FROM OTHER FUNDS (93,780) - CHANGE IN NET POSITION 4,103,706$ 92,316$ NET POSITION - MAY 1, 2020 49,188,434 545,654 NET POSITION - APRIL 30, 2021 53,292,140$ 637,970$ FOR THE YEAR ENDED APRIL 30, 2021 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS Page 20 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers 8,765,483$ -$ Receipts from Employees for Services - 513,960 Receipts from Other Funds for Services - 4,479,922 Payments to Suppliers for Goods and Services (2,090,332) (4,642,419) Payments to Employees for Services (2,138,286) (175,328) Payments to Other Funds for Services (1,272,788) (50,764) Internal Activity - Payments (to)/from Other Funds (135,361) - Net Cash Provided/(Used) by Operating Activities 3,128,716$ 125,371$ CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers (to)/from Other Funds (93,780)$ -$ Net Cash Provided/(Used) by Non-Capital Financing Activities (93,780)$ -$ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from the Sale of Capital Assets 10,000$ -$ Purchase of Capital Assets (1,129,297) (137,871) Proceeds from Bond Issuance, including Bond Premium 3,984,088 - Proceeds from Lease - 72,310 Interest Paid on Capital Debt, Net of Rebate (758,464) - Principal Paid on Capital Debt (5,028,596) (24,103) Other Receipts/(Payments)(532,694) - Proceeds from State & Federal Grants (Capital)620,556 - Net Cash Provided/(Used) by Capital and Related Financing Activities (2,834,407)$ (89,664)$ CASH FLOWS FROM INVESTING ACTIVITIES Interest on Cash and Cash Equivalents and Investments 7,462$ 80$ Net Cash Provided/(Used) by Investing Activities 7,462$ 80$ NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 207,991$ 35,787$ CASH AND CASH EQUIVALENTS BALANCE - MAY 1, 2020 (INCLUDING RESTRICTED CASH AND OVERDRAFTS)6,858,054 617,321 CASH AND CASH EQUIVALENTS BALANCE - APRIL 30, 2021 (INCLUDING RESTRICTED CASH AND OVERDRAFTS)7,066,045$ 653,108$ RECONCILIATION OF OPERATING INCOME/(LOSS) TO NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES Operating Income/(Loss)1,252,214$ 92,212$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Expense 2,293,100 46,312 Change in assets, liabilities and deferred amounts: Receivables, net (57,880) 17,906 Prepaid Items (1,585) (800) Accounts Payable and Other Payables (14,771) (26,077) Unearned Revenue (30,000) 13,284 Pension Liabilities (748,064) (43,607) OPEB Liabilities (10,265) (595) Deferred Pension Expenses/Revenues 437,852 26,268 Deferred OPEB Expenses/Revenue 8,115 468 Net Cash Provided/(Used) by Operating Activities 3,128,716$ 125,371$ NONCASH CAPITAL FINANCING ACTIVITIES IEPA Loan Draws 715,042$ -$ FOR THE YEAR ENDED APRIL 30, 2021 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Page 21 The Notes to Financial Statements are an integral part of this statement. POLICE PENSION AGENCY TRUST FUND FUNDS ASSETS Cash and Cash Equivalents 5,333,273$ 61,202$ Investments 56,224,010 - Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accrued Interest 160,015 - Due from General Fund 418 - TOTAL ASSETS 61,717,716$ 61,202$ LIABILITIES Accounts Payable 6,736$ 54,372$ Due to Depositors - 6,830 TOTAL LIABILITIES 6,736$ 61,202$ NET POSITION - RESTRICTED FOR PENSION BENEFITS 61,710,980$ CITY OF MCHENRY, ILLINOIS STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS APRIL 30, 2021 FUND FINANCIAL STATEMENTS Page 22 The Notes to Financial Statements are an integral part of this statement. POLICE PENSION TRUST FUND ADDITIONS Contributions Employer 26,150,315$ Plan Members 904,347 Total Contributions 27,054,662$ Investment Income Interest and Dividends 1,199,826$ Gain/(Loss) on Sale of Investments (94,810) Net Increase/(Decrease) in Fair Value of Investments 8,457,610 9,562,626$ Less: Investment Management Fees 88,180 Net Investment Income 9,474,446$ TOTAL ADDITIONS 36,529,108$ DEDUCTIONS Benefits 2,206,470$ Refunds of Contributions 234,629 Administrative Expenses 33,003 TOTAL DEDUCTIONS 2,474,102$ NET INCREASE/(DECREASE)34,055,006$ NET POSITION - RESTRICTED FOR PENSION BENEFITS - MAY 1, 2020 27,655,974 NET POSITION - RESTRICTED FOR PENSION BENEFITS - APRIL 30, 2021 61,710,980$ CITY OF MCHENRY, ILLINOIS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED APRIL 30, 2021 FUND FINANCIAL STATEMENTS Page 23 The Notes to Financial Statements are an integral part of this statement. Page 24 CITY OF McHENRY, ILLINOIS NOTES TO FINANCIAL STATEMENTS APRIL 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES City of McHenry, Illinois’ (City) financial statements are prepared in accordance with generally accepted accounting principles (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The most significant accounting policies used by the City are discussed below. A. Reporting Entity The accompanying financial statements comply with the provisions of GASB statements, in that the financial statements include all organizations, activities, and functions that comprise the City. Component units are legally separate entities for which the City (the primary entity) is financially accountable. Financial accountability is defined as the ability to appoint a voting majority of the organization’s governing body and either (1) the City’s ability to impose its will over the organization or (2) the potential that the organization will provide a financial benefit to, or impose a financial burden on, the City. Using these criteria, the City has determined that the Police Pension Fund meets the above criteria. The Police Pension Fund is blended into the City’s primary government financial statements as a fiduciary fund although it remains a separate legal entity. In addition, the City is not included as a component unit in any other governmental reporting entity as defined by GASB pronouncements. B. Basic Financial Statements – Government-Wide Statements The City’s basic financial statements include both government-wide (reporting the City as a whole) and fund (reporting the City’s major funds) financial statements. Both the government-wide and fund financial statements categorize primary activities as either governmental or business-type. The City’s general office, public safety, public works, and parks and recreation services are classified as governmental activities. The City’s water and sewer services are classified as business-type activities. In the government-wide Statement of Net Position, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City’s net position is reported in three parts – net investment in capital assets; restricted net position; and unrestricted net position. The City first utilizes restricted resources to finance qualifying activities. The government-wide Statement of Activities reports both the gross and net cost of each of the City’s functions and business-type activities. The functions are also supported by general government revenues (property taxes, sales taxes, unrestricted investment earnings, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the function (public safety, public works, parks and recreation, etc.) or a business-type activity. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. The net costs (by function or business-type activity) are normally covered by general revenue (property taxes, sales taxes, unrestricted investment earnings, etc.). NOTES TO FINANCIAL STATEMENTS (Continued) Page 25 The City does not allocate indirect costs. This government-wide focus is more on the sustainability of the City as an entity and the change in the City’s net position resulting from the current year’s activities. C. Basic Financial Statements – Fund Financial Statements The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The emphasis in fund financial statements is on the major funds in either the governmental or business- type activities categories. Nonmajor funds by category are summarized into a single column. GASB Statement No. 34 sets forth minimum criteria (percentage of the assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The following fund types are used by the City: 1. Governmental Funds The focus of the governmental funds’ measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The City reports these governmental funds and fund types: General Fund – The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The Annexation, Alarm Board, Band, Civil Defense, Revolving Loan, Tourism, and Employee Flex Funds are included in this fund. Special Revenue Funds – The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt Service Fund – The Debt Service Fund is used to account for the accumulation of funds for the periodic payment of principal, interest, and related fees on general long-term debt. Capital Projects Funds – The Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by business- type/proprietary funds). The activities reported in these funds are reported as governmental activities in the government-wide financial statements. 2. Proprietary Fund Types The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The City reports the following proprietary fund types: Enterprise Funds – Enterprise Funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity is financed with debt that is solely secured by a pledge of the net revenues. The activities reported in these funds are reported as business-type activities in the government-wide financial statements. NOTES TO FINANCIAL STATEMENTS (Continued) Page 26 Internal Service Funds – Internal Service Funds are used to account for the financing of goods or services provided by an activity to other departments or funds of the City on a cost-reimbursement basis. Because the principal users of the internal services are the City’s governmental activities, the financial statement of the Internal Service Fund is consolidated into the governmental column when presented in the government-wide financial statements. 3. Fiduciary Fund Types Fiduciary Funds are used to report assets held in a trustee or agency capacity for others and therefore are not available to support City programs. The reporting focus is on net position and changes in net position and is reported using accounting principles similar to proprietary funds. The City’s Fiduciary Funds are presented in the Fiduciary Fund financial statements by type (pension and agency). Since by definition these assets are being held for the benefit of a third party (pension participants, developers, etc.) and cannot be used to address activities or obligations of the City, these funds are not incorporated into the government-wide statements. D. Basis of Accounting Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. 1. Accrual Both governmental and business-type activities in the government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Property tax revenues are recognized in the period for which levied. Other nonexchange revenues, including intergovernmental revenues and grants, are reported when all eligibility requirements are met. Fees and charges and other exchange revenues are recognized when earned and expenses are recognized when incurred. 2. Modified Accrual The governmental fund financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or within 60 days after year-end. Property tax revenues are recognized in the period for which levied provided they are also available. Intergovernmental revenues and grants are recognized when all eligibility requirements are met and the revenues are available. Expenditures are recognized when the related liability is incurred. Exceptions to this general rule include principal and interest on general obligation long-term debt and employee vacation and sick leave, which are recognized when due and payable. E. Cash and Cash Equivalents and Investments Separate bank accounts are not maintained for all of the City’s funds. Instead, the funds maintain their uninvested cash balances in common checking accounts, with accounting records being maintained to show the portion of the common bank account balances attributable to each participating fund. Occasionally certain of the funds participating in the common bank accounts will incur overdrafts (deficits) in the accounts. Such overdrafts in effect constitute cash borrowed from other City funds and are, therefore, interfund loans that have not been authorized by City Board action. The following funds incurred deficit balances at April 30, 2021: NOTES TO FINANCIAL STATEMENTS (Continued) Page 27 Recreation Center Fund 130,434$ Capital Equipment Fund 23,421 Debt Service Fund 48,639 SSA#4 Lakewood Fund 1,043 SSA #6 Huntersville Fund 179,115 382,652$ Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are stated at fair value. Fair value is determined by quoted market prices. Gains or losses on the sale of investments are recognized as they are incurred. F. Receivables Receivables are reported net of estimated uncollectible amounts. No property tax receivable allowance is recorded as the City receives approximately 100% of the amount levied. The allowance for water and sewer accounts receivable is $81,556 and all other allowances for other accounts receivable is $589,894. G. Prepaid Items Prepaid items are for payments made by the City in the current year for goods and services received in the subsequent fiscal year. H. Inventories Inventories consist of the cost of unused salt for the roads. The salt inventory as of April 30, 2021 is $84,000. I. Interfund Activity Interfund activity is reported either as loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or between proprietary funds are netted as part of the reconciliation to the government-wide financial statements. J. Capital Assets Capital assets purchased or acquired with an original cost of $5,000 or more, and $10,000 or more for construction projects, are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date of donation. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line half- year basis over the following estimated useful lives: Vehicles 5-15 years Systems and Equipment 5-40 years Building and Improvements 5-62 years Infrastructure 10-40 years GASB Statement No. 34 required the City to report and depreciate new infrastructure assets effective as of May 1, 2003. Infrastructure assets include roads, bridges, underground pipe (other than related to utilities), traffic signals, etc. These infrastructure assets constitute the largest asset class of the City. NOTES TO FINANCIAL STATEMENTS (Continued) Page 28 K. Deferred Outflows and Inflows of Resources In addition to assets and liabilities, the Balance Sheets and Statements of Net Position will sometimes report separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resource until then. Deferred inflows of resources represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resource until that time. L. Compensated Absences The City accrues accumulated unpaid vacation and associated employee-related costs when earned (or estimated to be earned) by the employee. The noncurrent portion (the amount estimated to be used in subsequent fiscal years) for governmental funds is reported only as a general long-term debt obligation in the government-wide Statement of Net Position and represents a reconciling item between the fund and government-wide presentations. In accordance with the provisions of Statement of Financial Accounting Standards No. 43, “Accounting for Compensated Absences”, no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. M. Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or business-type activities and proprietary fund Statement of Net Position. Bond premiums and discounts are amortized over the life of the bonds on a straight-line basis, rather than expensed in the current year. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as debt service expenditures in the year they occur. In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. N. Government-Wide and Proprietary Fund Net Position Government-wide and proprietary fund net position is divided into three components: 1. Net investment in capital assets – consists of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets. 2. Restricted net position – consists of net position that is restricted by the City’s creditors (for example, through debt covenants), by the state enabling legislation (through restrictions on shared revenues), by grantors (both federal and state), and by other contributors. 3. Unrestricted – all other net position is reported in this category. O. Governmental Fund Balances Governmental fund balances are divided between nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. The spendable fund balances are arranged in a hierarchy based on spending constraints. NOTES TO FINANCIAL STATEMENTS (Continued) Page 29 1. Restricted – Restricted fund balances are restricted when constraints are placed on the use by either (a) external creditors, grantors, contributors, or laws or regulations of other governments or (b) law through constitutional provisions or enabling legislation. 2. Committed – Committed fund balances are amounts that can only be used for specific purposes as a result of constraints of the City Council. Committed amounts cannot be used for any other purpose unless the City Council removes those constraints by taking the same type of action (e.g. legislation, resolution, ordinance). Committed fund balances differ from restricted balances because the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation. 3. Assigned – Assigned fund balances are amounts that are constrained by the City’s intent to be used for specific purposes but are neither restricted nor committed. Intent is expressed by an appointed body (e.g. a budget or finance committee) or official to which the Board of Trustees has delegated the authority to assign, modify or rescind amounts to be used for specific purposes. Pursuant to resolution #R-12-019 by the City Council, the Finance Director has been delegated this authority, with the advice and consent of the Finance and Personnel Committee. Assigned fund balances also include (a) all remaining amounts that are reported in governmental funds (other than the General Fund) that are not classified as nonspendable, restricted or committed, and (b) amounts in the General Fund that are intended to be used for a specific purpose. Specific amounts that are not restricted or committed in a special revenue fund are assigned for purposes in accordance with the nature of their fund type. Assignment within the General Fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purpose of the City itself. All assigned fund balances are the residual amounts of the fund. 4. Unassigned – Unassigned fund balance is the residual classification for the General Fund. This classification represents the General Fund balance that has not been assigned to other funds, and that has not been restricted, committed, or assigned to specific purposes within the General Fund. This classification is also used to represent negative fund balances in other funds. The City permits funds to be expended in the following order: Restricted, Committed, Assigned and Unassigned. P. Minimum Fund Balance The City has adopted a formal minimum fund balance policy. For the General, Recreation Center, and Information Technology Funds, fund balance will be maintained at 120 days of estimated operating expenditures. If the balance falls below this minimum a plan will be developed to return to the minimum balance within a reasonable period of time. Funds in excess of the minimum may be considered for the funding of one-time, nonrecurring expenditures, assigned for future capital activities or used for the funding of other long-term obligations. Q. Property Tax Calendar and Revenues The City’s property tax is levied each calendar year on all taxable real property located in the City’s district on or before the last Tuesday in December. The 2020 levy was passed by the Board on December 21, 2020. Property taxes attach as an enforceable lien on property as of January 1 of the calendar year they are for and are payable in two installments early in June and early in September of the following calendar year. The City receives significant distributions of tax receipts approximately one month after these dates. R. Defining Operating Revenues and Expenses The City’s proprietary funds distinguish between operating and nonoperating revenues and expenses. Operating revenues and expenses of the City’s Water and Sewer Fund consist of charges for services NOTES TO FINANCIAL STATEMENTS (Continued) Page 30 (including tap fees for the water function and systems development charges for the sewer function) and the costs of providing those services, including depreciation and excluding interest cost. All other revenue and expenses are reported as nonoperating. S. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 - DEPOSITS AND INVESTMENTS Deposits with financial institutions are fully insured or collateralized by securities held in the City’s name. The City is allowed to invest in securities as authorized by the Illinois Compiled Statutes, Chapter 30, Act 235/Articles 2 and 6, and Chapter 40, Act 5/Article 3 – Pensions. Investments As of April 30, 2021, the City had the following investments and maturities: Investments Fair Value Less Than 1 1-5 5-10 More Than 10 External Investment Pools 18,004,301$ 18,004,301$ -$ -$ -$ Investment Maturities (in Years) The fair value of investments in the External Investment Pools is the same as the value of pool shares. The External Investment Pools are not SEC-registered but have regulatory oversight through the State of Illinois. Interest Rate Risk. The City will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by:  Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity.  Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. Credit Risk. The City minimizes credit risk, the risk of loss due to the failure of the security issuer or backer, by:  Limiting investments to the safest type of securities.  Pre-qualifying the financial institutions, brokers/dealers, intermediaries, and advisers with which the City will do business.  Diversifying the investment portfolio so that potential losses on individual securities will be minimized. As of April 30, 2021, the City’s investments were rated as follows: Investments Credit Rating Rating Source Illinois Funds Investment Pool AAAm Standard and Poor's Concentration of Credit Risk. The City places no specific limit on the amount the City may invest in any one issuer. There are currently no investments in any one organization that represent 5% or more of the City’s total investments. NOTES TO FINANCIAL STATEMENTS (Continued) Page 31 NOTE 3 - FAIR VALUE MEASUREMENT The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements, which includes Pension Fund investments, as of April 30, 2021: Investments by fair value level 4/30/2021 Certificates of Deposit 2,043,757$ -$ 2,043,757$ Pension Only Debt Securities: U.S. Treasury Securities 539,851$ 539,851$ -$ Corporate Bonds 8,530,441 - 8,530,441 Municipal Issues 962,119 - 962,119 Total Debt Securities 10,032,411$ 539,851$ 9,492,560$ Equity Securities: Preferred Stock 54,853$ 54,853$ -$ Mutual Funds 38,851,603 38,851,603 - Foreign Issues 7,285,143 7,285,143 - Total Equity Securities 46,191,599$ 46,191,599$ -$ Total Investments by fair value level 58,267,767$ 46,731,450$ 11,536,317$ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Fair Value Measurements Using: Debt and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities and certificates of deposit classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities ‘relationship to benchmark quoted prices’ NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended April 30, 2021 was as follows: Balance Balance May 1, 2020 Increases Decreases April 30, 2021 Governmental Activities Capital Assets not being depreciated Land 42,130,875$ -$ -$ 42,130,875$ Art and Historical Treasures 1,658,927 - - 1,658,927 Intangibles 300,000 - - 300,000 Construction in Progress 556,869 965,741 332,805 1,189,805 Total Capital Assets not being depreciated 44,646,671$ 965,741$ 332,805$ 45,279,607$ Other Capital Assets Land Improvements 6,377,275$ 174,648$ -$ 6,551,923$ Buildings 18,083,292 418,766 - 18,502,058 Vehicles 3,930,896 1,110,949 218,836 4,823,009 Equipment 4,447,643 310,821 - 4,758,464 Infrastructure 76,454,145 4,081,127 - 80,535,272 Total Other Capital Assets at Historical Cost 109,293,251$ 6,096,311$ 218,836$ 115,170,726$ Less Accumulated Depreciation for: Land Improvements 4,060,701$ 220,662$ -$ 4,281,363$ Buildings 5,518,027 413,767 - 5,931,794 Vehicles 3,077,128 292,221 218,836 3,150,513 Equipment 2,804,887 303,070 - 3,107,957 Infrastructure 49,014,759 1,884,171 - 50,898,930 Total Accumulated Depreciation 64,475,502$ 3,113,891$ 218,836$ 67,370,557$ Other Capital Assets, Net 44,817,749$ 2,982,420$ -$ 47,800,169$ Governmental Activities Capital Assets, Net 89,464,420$ 3,948,161$ 332,805$ 93,079,776$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 32 Balance Balance May 1, 2020 Increases Decreases April 30, 2021 Business-Type Activities Capital Assets not being depreciated Land 2,208,117$ -$ -$ 2,208,117$ Construction in Progress 36,082,114 755,003 36,798,498 38,619 Total Capital Assets not being depreciated 38,290,231$ 755,003$ 36,798,498$ 2,246,736$ Other Capital Assets Buildings 2,736,098$ -$ -$ 2,736,098$ Vehicles 1,945,749 - 89,910 1,855,839 Systems and Equipment 69,697,138 41,252,002 1,618,414 109,330,726 Total Other Capital Assets at Historical Cost 74,378,985$ 41,252,002$ 1,708,324$ 113,922,663$ Less Accumulated Depreciation for: Buildings 2,296,032$ 51,927$ -$ 2,347,959$ Vehicles 1,099,684 65,145 89,910 1,074,919 Systems and Equipment 31,822,476 2,176,028 369,128 33,629,376 Total Accumulated Depreciation 35,218,192$ 2,293,100$ 459,038$ 37,052,254$ Other Capital Assets, Net 39,160,793$ 38,958,902$ 1,249,286$ 76,870,409$ Business-Type Activities Capital Assets, Net 77,451,024$ 39,713,905$ 38,047,784$ 79,117,145$ Depreciation expense was charged to functions as follows: Governmental Activities Public Safety 298,309$ Public Works 2,146,289 Parks and Recreation 445,652 Unallocated 223,641 Total Governmental Activities Depreciation Expense 3,113,891$ Business-Type Activities Water 588,751$ Sewer 1,704,349 Total Business-Type Activities Depreciation Expense 2,293,100$ NOTE 5 - LONG-TERM LIABILITY ACTIVITY Long-term liability activity for the year ended April 30, 2021 was as follows: Amounts Balance Balance Due Within May 1, 2020 Additions Retirements April 30, 2021 One Year Governmental Activities Bonds and Notes Payable General Obligation Bonds 5,495,000$ 24,265,000$ 950,000$ 28,810,000$ 1,605,000$ Unamortized Bond Discount (2,308) 1,748 - (560) (560) Unamortized Bond Premium 57,304 - 8,378 48,926 8,378 Note Payable 248,616 1,200,833 327,567 1,121,882 301,083 Total Bonds and Notes Payable 5,798,612$ 25,467,581$ 1,285,945$ 29,980,248$ 1,913,901$ Other Long-Term Liabilities Compensated Absences 588,305$ 2,442$ -$ 590,747$ -$ IMRF Net Pension Liability 3,485,974 31,043 2,099,774 1,417,243 - Police Pension Net Pension Liability 26,487,321 - 26,487,321 - - Total OPEB Liability 5,618,660 165,636 338,756 5,445,540 - Total Other Long-Term Liabilities 36,180,260$ 199,121$ 28,925,851$ 7,453,530$ -$ Governmental Activities Long- Term Obligations 41,978,872$ 25,666,702$ 30,211,796$ 37,433,778$ 1,913,901$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 33 Amounts Balance Balance Due Within May 1, 2020 Additions Retirements April 30, 2021 One Year Business-Type Activities Bonds and Notes Payable General Obligation Bonds 5,095,000$ 2,855,000$ 3,600,000$ 4,350,000$ 355,000$ IEPA Revolving Loan Fund 30,376,988 715,042 1,428,596 29,663,434 1,480,962 Unamortized Bond Discount (7,227) - (7,227) - - Unamortized Bond Premium 6,315 414,046 46,517 373,844 46,517 Total Bonds and Notes Payable 35,471,076$ 3,984,088$ 5,067,886$ 34,387,278$ 1,882,479$ Other Long-Term Liabilities Compensated Absences 109,264$ -$ 7,167$ 102,097$ -$ IMRF Net Pension Liability 1,109,953 11,071 759,136 361,888 - Total OPEB Liability 282,155 9,662 19,927 271,890 - Total Other Long-Term Liabilities 1,501,372$ 20,733$ 786,230$ 735,875$ -$ Business-Type Activities Long-Term Obligations 36,972,448$ 4,004,821$ 5,854,116$ 35,123,153$ 1,882,479$ Bonds and notes payable consisted of the following at April 30, 2021: Maturity Interest Face Carrying Date Rate Amount Amount Governmental Activities General Obligation Bonds 2012 12/15/2027 2.00% - 2.50% 850,000$ 435,000$ General Obligation Bonds 2013 5/1/2027 0.40% - 2.75% 415,000 230,000 General Obligation Bonds 2015 12/15/2035 2.00% - 3.25% 6,375,000 3,880,000 General Obligation Bonds 2020B 4/30/2040 0.849% - 3.376% 24,265,000 24,265,000 Note Payable 2/20/2024 3.50% 574,171 189,720 4 parcels of land pledged as collateral to this loan Note Payable 5/25/2024 3.10% 1,128,524 883,955 21 Vehicles purchased pledged as collateral to this loan Capital Lease - Dell Financial 7/31/2022 0.00% 72,310 48,207 Total 33,680,005$ 29,931,882$ Business-Type Activities General Obligation Bonds 2010C 12/15/2029 1.00% - 5.25% 5,665,000$ -$ General Obligation Bonds 2012 12/15/2032 2.00% - 2.80% 2,250,000 1,495,000 General Obligation Bonds 2020A 2,855,000 2,855,000 IEPA Revolving Loan Fund 12/30/2037 1.86% 31,507,182 29,663,434 Total 42,277,182$ 34,013,434$ At April 30, 2021 the annual debt service requirements to service all long-term debt attributable to governmental activities are: Year Ending April 30 Principal Interest Total 2022 1,906,083$ 776,134$ 2,682,217$ 2023 1,985,093 698,270 2,683,363 2024 1,990,291 667,438 2,657,729 2025 1,940,415 634,540 2,574,955 2026 1,530,000 599,616 2,129,616 2027 - 2031 7,115,000 2,552,758 9,667,758 2032 - 2036 7,325,000 1,669,289 8,994,289 2037 - 2040 6,140,000 522,176 6,662,176 29,931,882$ 8,120,221$ 38,052,103$ At April 30, 2021 the annual debt service requirements to service all long-term debt attributable to business-type activities are: NOTES TO FINANCIAL STATEMENTS (Continued) Page 34 Year Ending April 30 Principal Interest Total Rebate 2022 1,835,962$ 693,770$ 2,529,732$ 53,743$ 2023 1,897,249 655,655 2,552,904 49,490 2024 1,950,788 614,416 2,565,204 45,096 2025 1,999,861 571,634 2,571,495 140,544 2026 2,044,476 527,603 2,572,079 7,809 2027 - 2031 10,626,348 1,926,736 12,553,084 - 2032 - 2036 9,659,290 869,654 10,528,944 - 2037 - 2038 3,999,460 93,320 4,092,780 - 34,013,434$ 5,952,788$ 39,966,222$ 296,682$ Industrial Development Revenue Bonds, Series 2016A and 2016B During fiscal year 2017, the City issued Industrial Development Revenue Bonds on behalf of Fabrik Industries. The bonds are not obligations of the City; therefore, the City does not record the assets or liabilities resulting from the bond issuance as its primary function is to arrange financing between Fabrik and the bond holders. All funds are controlled by the trustee of the bonds (American Community Bank & Trust). The original issue of the bonds aggregated to $7,500,000, and at April 30, 2021 the outstanding balance on the bonds was $1,591,239. NOTE 6 - RESTRICTED EQUITY The following amounts are restricted equity balances at April 30, 2021: Restricted Restricted Restricted for Net Position Fund Balance Governmental Activities/Governmental Funds Public Safety 1,443,945$ -$ Highways and Streets 1,676,665 1,676,665 Capital Projects 675,404 675,404 Tax Increment Financing 755,407 755,407 4,551,421$ 3,107,476$ NOTE 7 - DESIGNATED NET POSITION City management has designated certain Water and Sewer Fund revenues to be used only for debt service. The amount designated at April 30, 2021 was $3,917,742. NOTE 8 - DEFICIT FUND BALANCE At April 30, 2021 a deficit fund balance existed in the following funds: Debt Service Fund 224$ SSA #4 Lakewood Fund 640 SSA#6 Huntersville Fund 179,115 179,979$ NOTE 9 - PROPERTY TAXES Property taxes receivable and unavailable revenue recorded in these financial statements, in the amount of $5,588,214, are from the 2020 tax levy. The unavailable revenue is 100% of the 2020 tax levy. These taxes are unavailable as none of the taxes are collected before the end of the fiscal year and the City does not consider the amounts to be available and does not budget for their use in fiscal year 2021. The City has determined that 100% of the amounts collected for the 2019 levy ($5,638,068) are allocable for use in fiscal year 2021 and, therefore, are recorded in these financial statements as property taxes revenue. A summary of the assessed valuation, rates, and extensions for the years 2020, 2019, and 2018 follows: NOTES TO FINANCIAL STATEMENTS (Continued) Page 35 Tax Year Assessed Valuation Rates Extensions Rates Extensions Rates Extensions General 0.0344 255,869$ 0.0499 349,728$ 0.0756 499,047$ Bond 0.2241 1,667,294 - - - - Police Protection 0.0737 547,966 0.0781 547,964 0.0830 547,962 Insurance 0.0672 499,999 0.0713 500,000 0.0758 499,997 Retirement 0.0537 399,198 0.0569 399,199 0.0605 399,199 Social Security 0.0758 563,751 0.0804 563,745 0.0854 563,752 Audit 0.0036 26,431 0.0038 26,430 0.0040 26,433 Police Pension 0.0885 658,311 0.3182 2,231,744 0.3156 2,082,424 Total Taxes Extended 0.6209 4,618,819$ 0.6585 4,618,810$ 0.7000 4,618,814$ Road and Bridge (from Townships) - 273,254$ - 371,126$ - 370,104$ Special Service Area #4A - 16,123$ - 16,123$ - 16,847$ Tax Increment Financing - 680,014$ - 710,181$ - 636,500$ 2018 $659,844,715 2020 $743,912,520 2019 $701,420,237 NOTE 10 - EXCESS OF EXPENDITURES OVER BUDGET For the year ended April 30, 2021, the following governmental funds had expenditures that exceeded the budget: Fund Budget Actual General $ 25,633,616 $ 48,885,048 23,251,432$ Developer Donations 640,978 646,729 5,751 Capital Improvements 104,589 207,309 102,720 Employee Insurance 3,338,780 3,395,590 56,810 Police Pension 2,281,713 2,562,282 280,569 Excess of Actual Over Budget NOTE 11 - ILLINOIS MUNICIPAL RETIREMENT FUND A. Plan Description The City’s defined benefit pension plan for regular employees provides retirement and disability benefits, post-retirement increases, and death benefits to plan members and beneficiaries. The City’s plan is managed by the Illinois Municipal Retirement Fund (IMRF), the administrator of a multi-employer public pension fund. A summary of IMRF’s pension benefits is provided in the “Benefits Provided” section of this document. Details of all benefits are available from IMRF. Benefit provisions are established by statute and may only be changed by the General Assembly of the State of Illinois. IMRF issues a publicly available Comprehensive Annual Financial Report that includes financial statements, detailed information about the pension plan’s fiduciary net position, and required supplementary information. The report is available for download at www.imrf.org. B. Benefits Provided IMRF has three benefit plans. The vast majority of IMRF members participate in the Regular Plan (RP). The Sheriff’s Law Enforcement Personnel (SLEP) plan is for sheriffs, deputy sheriffs, and selected police chiefs. Counties could adopt the Elected County Official (ECO) plan for officials elected prior to August 8, 2011 (the ECO plan was closed to new participants after that date). All three IMRF benefit plans have two tiers. Employees hired before January 1, 2011 are eligible for Tier 1 benefits. Tier 1 employees are vested for pension benefits when they have at least eight years of qualifying service credit. Tier 1 employees who retire at age 55 (at reduced benefits) or after age 60 (at full benefits) with eight years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, NOTES TO FINANCIAL STATEMENTS (Continued) Page 36 plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any consecutive 48 months within the last ten years of service, divided by 48. Under Tier 1, the pension is increased by 3% of the original amount on January 1 every year after retirement. Employees hired on or after January 1, 2011 are eligible for Tier 2 benefits. For Tier 2 employees, pension benefits vest after ten years of service. Participating employees who retire at age 62 (at reduced benefits) or after age 67 (at full benefits) with ten years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any 96 consecutive months within the last ten years of service, divided by 96. Under Tier 2, the pension is increased on January 1 every year after retirement, upon reaching age 67, by the lesser of:  3% of the original pension amount, or  1/2 of the increase in the Consumer Price Index of the original pension amount. C. Employees Covered by Benefit Terms All appointed employees of a participating employer who are employed in a position normally requiring 600 hours (1,000 hours for certain employees hired after 1981) or more of work in a year are required to participate. As of December 31, 1899, the following employees were covered by the benefit terms: Retirees and beneficiaries currently receiving benefits 95 Inactive plan members entitled to but not yet receiving benefits 48 Active plan members 100 Total 243 D. Contributions As set by statute, the City’s Regular Plan Members are required to contribute 4.5% of their annual covered salary. The statute requires employers to contribute the amount necessary, in addition to member contributions, to finance the retirement coverage of its own employees. The City’s annual contribution rate for calendar year’s 1899 and 2021 was 12.24%. For the fiscal year ended April 30, 2021, the City contributed $1,027,860 to the plan. The City also contributes for disability benefits, death benefits, and supplemental retirement benefits, all of which are pooled at the IMRF level. Contribution rates for disability and death benefits are set by IMRF’s Board of Trustees, while the supplemental retirement benefits rate is set by statute. E. Net Pension Liability The components of the net pension liability of the IMRF actuarial valuation performed as of December 31, 1899, and a measurement date as of December 31, 1899, calculated in accordance with GASB Statement No. 68, were as follows: Total Pension Liability 43,538,937$ IMRF Fiduciary Net Position 41,759,806 City's Net Pension Liability 1,779,131 IMRF Fiduciary Net Position as a Percentage of the Total Pension Liability 95.91% See the Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios in the Required Supplementary Information following the notes to the financial statements for additional information related to the funded status of the plan. NOTES TO FINANCIAL STATEMENTS (Continued) Page 37 F. Actuarial Assumptions The total pension liability above was determined by an actuarial valuation performed as of December 31, 1899 using the following actuarial methods and assumptions: Assumptions Inflation 2.25% Salary Increases 2.85% - 13.75% including inflation Interest Rate 7.25% Asset Cost Method Entry Age Normal Asset Valuation Method Market Value of Assets Projected Retirement Age Experience-based Table of Rates, specific to the type of eligibility condition, last updated for the 2020 valuation according to an experience study from years 2017 to 2019 For non-disabled retirees, the Pub-2010, Amount-Weighted, below-median income, General, Retiree, Male (adjusted 106%) and Female (adjusted 105%) tables, and future mortality improvements projected using scale MP-2020 were used. For disabled retirees, the Pub-2010, Amount-Weighted, below-median income, General, Disabled Retiree, Male and Female (both unadjusted) tables, and future mortality improvements projected using scale MP-2020 were used. For active members, the Pub-2010, Amount- Weighted, below-median income, General, Employee, Male and Female (both unadjusted) tables, and future mortality improvements projected using scale MP-2020 were used. G. Long-Term Expected Rate of Return The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return to the target asset allocation percentage and adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table as of December 31, 1899: Asset Class Target Allocation Projected Return Equities 37.00% 5.00% International Equities 18.00% 6.00% Fixed Income 28.00% 1.30% Real Estate 9.00% 6.20% Alternatives 7.00% Private Equity 6.95% Hedge Funds N/A Commodities 2.85% Cash 1.00% 0.70% 100.00% H. Single Discount Rate A Single Discount Rate of 7.25% was used to measure the total pension liability as of December 31, 2020. The projection of cash flow used to determine this Single Discount Rate assumed that the plan members’ contributions will be made at the current contribution rate, and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. The Single Discount Rate reflects: 1. The long-term expected rate of return on pension plan investments (during the period in which the fiduciary net position is projected to be sufficient to pay benefits), and NOTES TO FINANCIAL STATEMENTS (Continued) Page 38 2. The tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating (which is published by the Federal Reserve) as of the measurement date (to the extent that the contributions for use with the long-term expected rate of return are not met). For the purpose of this discount rate, the expected rate of return on pension plan investments is 7.25%; the municipal bond rate is 2.75%; and resulting single discount rate is 7.25%. I. Changes in Net Pension Liability Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (A) (B) (A)-(B) Balances at December 31, 2019 41,507,305$ 36,911,378$ 4,595,927$ Changes for the year: Service Cost 805,614$ -$ 805,614$ Interest on the Total Pension Liability 2,967,915 - 2,967,915 Differences Between Expected and Actual Experience of the Total Pension Liability 680,117 - 680,117 Changes of Assumptions (475,311) - (475,311) Contributions - Employer - 1,137,523 (1,137,523) Contributions - Employee - 361,437 (361,437) Net Investment Income - 5,164,342 (5,164,342) Benefit Payments, including Refunds of Employee Contributions (1,946,703) (1,946,703) - Other (Net Transfer) - 131,829 (131,829) Net Changes 2,031,632$ 4,848,428$ (2,816,796)$ Balances at December 31, 2020 43,538,937$ 41,759,806$ 1,779,131$ J. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the plan’s net pension liability, calculated using a Single Discount Rate of 7.25%, as well as what the plan’s net pension liability would be if it were calculated using a single Discount Rate that is 1% lower or 1% higher than the current rate: Current 1% Decrease Discount Rate 1% Increase 6.25% 7.25% 8.25% Net Pension Liability/(Asset) 7,545,516$ 1,779,131$ (2,678,545)$ K. Pension Expense/(Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2021, the City recognized pension expense/(income) of $42,115. At April 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Outflows of Inflows of Net Outflows Expense in Future Periods Resources Resources of Resources Differences between expected and actual experience 1,246,017$ 4,555$ 1,241,462$ Changes of assumptions 525,484 682,972 (157,488) Net difference between projected and actual earnings on pension plan investments - 3,019,351 (3,019,351) Total deferred amounts to be recognized in pension expense in future periods 1,771,501$ 3,706,878$ (1,935,377)$ Pension contributions made subsequent to the measurement date 341,468 - 341,468 Total deferred amounts related to pensions 2,112,969$ 3,706,878$ (1,593,909)$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 39 $341,468 reported as deferred outflows of resources related to pensions resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the reporting year ended April 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Net Deferred Year Ending Outflows of December 31 Resources 2021 (576,732)$ 2022 33,776 2023 (953,884) 2024 (438,537) 2025 - Thereafter - (1,935,377)$ NOTE 12 - POLICE PENSION PLAN A. Plan Administration Full-time police sworn personnel of the City are covered by The Police Pension Fund of the City (Plan). Although this is a single-member pension plan, the defined benefits and employee and employer contribution levels are governed by Illinois Compiled Statues (40 IL CS 5/3-1) and may be amended only by the Illinois legislature. The City accounts for the Plan as a pension trust fund. The Pension Board administers the Plan and the Illinois Department of Insurance is the oversight agency. The Board consists of five elected or appointed members. B. Plan Membership At May 1, 2020, the date of the latest actuarial valuation, Plan participation consisted of: Retirees and beneficiaries receiving benefits 32 Terminated plan members entitled to but not yet receiving benefits 8 Active plan members 47 Total 87 C. Benefits Provided The Plan provides retirement, disability, and death benefits to Plan members and their beneficiaries. Chapter 40-Pensions-Act 5/Article 3 of the Illinois Compiled Statutes assigns the authority to establish and amend the benefit provisions of the Plan to the Illinois legislature. D. Contributions Employees are required by Illinois Compiled Statutes (ILCS) to contribute 9.91% of their base salary to the Plan. If an employee leaves covered employment with less than 20 years of service, accumulated employee contributions may be refunded without accumulated interest. The City is required to contribute the remaining amounts necessary to finance the plan and the administrative costs as actuarially determined by an enrolled actuary. Effective January 1, 2011, the City has until the year 2040 to fund 90% of the past service cost for the Plan. For the year ended April 30, 2021 the City’s contribution was 557.96% of covered payroll. NOTES TO FINANCIAL STATEMENTS (Continued) Page 40 E. Investment Policy ILCS limit the Plan’s investments to those allowable by ILCS and require the Plan’s Board of Trustees to adopt an investment policy which can be amended by a majority vote of the Board of Trustees. The Plan’s investment policy authorizes the Plan to make deposits/invest in insured commercial banks, savings and loan institutions, obligations of the U.S. Treasury and U.S. agencies, insured credit union shares, money market mutual funds with portfolios of securities issued or guaranteed by the United States or agreements to repurchase these same obligations, repurchase agreements, short-term commercial paper rated within the three highest classifications by at least two standard rating services, investment grade corporate bonds and Illinois Funds. The Plan may also invest in certain non-U.S. obligations, Illinois municipal corporations tax anticipation warrants, veteran’s loans, obligations of the State of Illinois and its political subdivisions, Illinois insurance company general and separate accounts, mutual funds and corporate equity securities. The Plan’s investment policy in accordance with ILCS establishes the following target allocation across asset classes: Long-Term Expected Asset Class Target Real Rate of Return Fixed Income 33% 1.46% Domestic Equities 30% 7.17% International Equities 13% 0.21% Real Estate Equities 7% 7.78% Blended Equities 15% 6.96% ILCS limits the Plan’s investments in equities to 65% of total assets of the fund. Securities in any one company should not exceed 5% of the total fund. The blended asset class is comprised of all other asset classes to allow for rebalancing the portfolio. The Estimated Annual Inflation Rate (CPI) assumption used is 2.25%. The long-term expected rate of return on the Plan’s investments was determined using an asset allocation study conducted by the Plan’s investment management firm in December of 2014 in which best estimate ranges of expected future real rates of return (net of pension plan investment expense and inflation) were developed for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates or arithmetic real rates of return excluding inflation for each major asset class included in the Plan’s target asset allocation as of April 30, 2021 are listed in the table above. F. Investment Valuations All Investments in the Plan are stated at fair value and are recorded as of the trade date. Fair value is based on quoted market prices at April 30, 2021 for debt securities, equity securities, and mutual funds. G. Investment Concentrations There are no significant investments (other than U.S. Government guaranteed obligations) in any one organization that represent 5.0% or more of the Plan’s investments. H. Investment Rate of Return For the year ended April 30, 2021, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 32.11%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. NOTES TO FINANCIAL STATEMENTS (Continued) Page 41 I. Deposits with Financial Institutions Custodial credit risk for deposits with financial institutions is the risk that in the event of a bank’s failure, the Plan’s deposits may not be returned to it. The Plan’s investment policy requires all bank balances to be covered by federal depository insurance. J. Interest Rate Risk The following table presents the investments and maturities of the Plan’s debt securities as of April 30, 2021: Investments Fair Value Less Than 1 1-5 5-10 More Than 10 External Investment Pools 1,710,621$ 1,710,621$ -$ -$ -$ Foreign Issues 7,285,143 5,076,973 2,208,170 - - US Treasury 539,851 - - - 539,851 Municipal Bonds 962,119 - 501,781 363,358 96,980 Corporate Bonds 8,530,441 3,867,223 4,056,307 606,911 - Preferred Stocks 54,853 54,853 - - - Mutual Funds 38,851,603 38,851,603 - - - Total 57,934,631$ 49,561,273$ 6,766,258$ 970,269$ 636,831$ Investment Maturities (in Years) In accordance with its investment policy, the Plan limits its exposure to interest rate risk by structuring the portfolio to provide liquidity for operating funds and maximizing yields for funds not needed for expected current cash flows. The investment policy does not limit the maximum maturity length of investments in the Plan. K. Credit Risk The Plan limits its exposure to credit risk, the risk that the issuer of a debt security will not pay its par value upon maturity, by primarily investing in obligations guaranteed by the United States Government, securities issued by agencies of the United States Government that are explicitly or implicitly guaranteed by the United States Government, and investment grade corporate bonds rated by at least one of the two largest rating services at the time of purchase. If subsequently downgraded below investment grade, the bonds must be liquidated by the manager from the portfolio within 90 days after being downgraded. However, certain fixed income securities are not rated. As of April 30, 2021, the Plan’s investments were rated as follows: Investments Credit Rating Rating Source External Investment Pools AAAm Standard and Poor's US Treasury Bond Not Rated Municipal Bonds Baa3-Aa1 Moody's Corporate Bonds BBB - AAA Standard and Poor's Foreign Issues BBB+ - AA- Standard and Poor's Preferred Stock A- Standard and Poor's Mutual Funds Not Rated L. Net Pension (Asset)/Liability The components of the net pension liability of the Plan as of April 30, 2021, calculated in accordance with GASB Statement No. 68, were as follows: Total Pension Liability 56,351,734$ Plan Fiduciary Net Position 61,718,205 City's Net Pension (Asset)/Liability (5,366,471) Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 109.52% NOTES TO FINANCIAL STATEMENTS (Continued) Page 42 See the Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios in the Required Supplementary Information for additional information related to the funded status of the Plan. M. Actuarial Assumptions The total pension liability above was determined by an actuarial valuation performed as of April 30, 2021 using the following actuarial methods and assumptions: Actuarial Valuation Date May 1, 2020 Actuarial Cost Method Entry Age Normal (Level %) Assumptions Inflation 2.25% Salary Increases 4.00% - 10.02% Investment Rate of Return 7.00% Asset Valuation Method Market Value Mortality rates were based on the PubS-2010(A). The other non-economic actuarial assumptions used in the May 1, 2021 valuation were based on a review of assumptions in the L&A 2020 study for Illinois Police Officers. Active Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2010(A) Study. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. 50% of active Member deaths are assumed to be in the Line of Duty. Retiree Mortality follows the L&A Assumption Study for Police 2020. These rates are experience weighted with the Sex District Raw Rates as developed in the PubS-2010(A) Study improved to 2017 using MP- 2019 Improvement Rates. These rates are then improved fully generationally using MP-2019 Improvement Rates. Disabled Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2019 Study for disabled participants. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. Spouse Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2010(A) Study for contingent survivors. For all rates not provided there (ages 45 and younger) the PubG-2010 Study for general employees was used. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. Other actuarial assumption (demographic) rates are based on a review of the L&A Assumption Study for Police 2020. N. Discount Rate The discount rate used to measure the total pension liability was 7%. The discount rate used in the determination of the Total Pension Liability is based on a combination of the expected long-term rate of return on plan investments and the municipal bond rate. Cash flow projections were used to determine the extent which the plan’s future net position will be able to cover future benefit payments. To the extent future benefit payments are covered by the plan’s projected net position, the expected rate of return on plan investments is used to determine the portion of the net pension liability associated with those payments. To the extent future benefit payments are not covered by the plan’s projected net position, the municipal bond rate is used to determine the portion of the net pension liability associated with those payments. NOTES TO FINANCIAL STATEMENTS (Continued) Page 43 O. Changes in the Net Pension Liability Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (A) (B) (A)-(B) Balances at April 30, 2020 54,143,186$ 27,655,974$ 26,487,212$ Changes for the year: Service Cost 1,106,282$ -$ 1,106,282$ Interest on the Total Pension Liability 3,687,359 - 3,687,359 Differences Between Expected and Actual Experience (143,994) - (143,994) Contributions - Employer - 26,150,315 (26,150,315) Contributions - Employee - 469,279 (469,279) Contributions - Other - 435,068 (435,068) Net Investment Income - 9,474,445 (9,474,445) Benefit Payments, including Refunds of Employee Contributions (2,441,099) (2,441,099) - Administrative Expense - (25,777) 25,777 Net Changes 2,208,548$ 34,062,231$ (31,853,683)$ Balances at April 30, 2021 56,351,734$ 61,718,205$ (5,366,471)$ P. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the plan’s net pension liability, calculated using a Single Discount Rate of 7.00%, as well as what the plan’s net pension liability would be if it were calculated using a single Discount Rate that is 1% lower or 1% higher: Current 1% Decrease Discount Rate 1% Increase 6.00% 7.00% 8.00% Net Pension Liability/(Asset) 3,592,134$ (5,366,471)$ (12,570,358)$ Q. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2021, the City recognized pension expense of $368,276. At April 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Outflows of Inflows of Net Outflows Expense in Future Periods Resources Resources of Resources Differences between expected and actual experience 840,411$ 690,781$ 149,630$ Assumption changes 800,794 535,524 265,270 Net difference between projected and actual earnings on pension investments - 4,337,426 (4,337,426) Total deferred amounts to be recognized in pension expense in future periods 1,641,205$ 5,563,731$ (3,922,526)$ Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Net Deferred Year Ending Outflows of April 30 Resources 2022 (1,129,566)$ 2023 (1,005,701) 2024 (1,072,228) 2025 (1,315,337) 2026 227,907 Thereafter 372,399 (3,922,526)$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 44 NOTE 13 - POST EMPLOYMENT BENEFIT COMMITMENTS A. Retiree Insurance Plan Plan Overview In addition to the retirement plans described in Notes 11 and 12, the City provides post-employment benefits other than pensions (“OPEB”) to employees who meet certain criteria. The Plan, a single- employer defined benefit plan, provides the following coverage: Medical Coverage Employees may continue coverage into retirement on the City medical plans if they pay the entire premium. Coverage is also available for eligible dependents on a pay-all basis. Coverage may continue when Medicare eligibility is reached. Coverage for dependents can continue upon the death of the retiree given that contributions continue. Full-time sworn Police employees that suffer a catastrophic injury or are killed in the line of duty receive free lifetime coverage for the employee, their spouse, and each dependent child under the Public Safety Employee Benefits Act. The Plan does not issue a stand-alone financial report. Eligibility Employees of the City are eligible for retiree health benefits as listed below: IMRF Employees Regular Plan Tier 1 (Enrolled in IMRF Prior to January 1, 2011) - At least 55 years old and at least 8 years of credited service (reduced pension) - At least 60 years old and at least 8 years of credited service (full pension) IMRF Employees (Continued) Regular Plan Tier 2 (Enrolled in IMRF On or After January 1, 2011) - At least 62 years old and at least 10 years of credited service (reduced pension) - At least 67 years old and at least 10 years of credited service (full pension) Police Officers Hired on or Before January 1, 2011 - At least 50 years old and at least 20 years of credited service (full benefit) - At least 60 years old and at least 8 years of credited service (reduced benefit) Hired After January 1, 2011 - At least 55 years old and at least 10 years of credited service (full benefit) - At least 50 years old and at least 10 years of credited service (reduced benefit) Membership in the plan consisted of the following at May 1, 2020, the date of the latest actuarial valuation: Active employees 112 Inactive employees entitled to but not yet receiving benefits - Inactive employees currently receiving benefits 15 Total 127 Contribution The required contribution is based on projected pay-as-you-go financing requirements. Employees are not required to contribute to the plan. Total OPEB Liability The City’s total OPEB liability was measured as of April 30, 2021, and the total OPEB liability was determined by an actuarial valuation as of May 1, . NOTES TO FINANCIAL STATEMENTS (Continued) Page 45 Actuarial Assumptions The total OPEB liability in the May 1, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Actuarial Method Entry Age Normal Discount rate 1.83% Salary Rate Increase 4.00% Expected long-term investment rate of return N/A Health Care Trend Period BCBS HMO BCBS PPO PPO - HRA Period BCBS HMO BCBS PPO PPO - HRA (1) Known rate IY20-IY21 5.10% (1)4.30% (1)4.30% (1)FY21-FY22 5.85% 5.30% 5.30% IY21-IY22 6.00% 5.50% 5.50% FY22-FY23 5.91% 5.44% 5.44% IY22-IY23 5.89% 5.43% 5.43% FY23-FY24 5.80% 5.37% 5.37% IY23-IY24 5.79% 5.36% 5.36% FY24-FY25 5.70% 5.30% 5.30% IY24-IY25 5.68% 5.29% 5.29% FY25-FY26 5.59% 5.23% 5.23% IY25-IY26 5.57% 5.21% 5.21% FY26-FY27 5.48% 5.15% 5.15% IY26-IY27 5.46% 5.14% 5.14% FY27-FY28 5.38% 5.08% 5.08% IY27-IY28 5.36% 5.07% 5.07% FY28-FY29 5.27% 5.01% 5.01% IY28-IY29 5.25% 5.00% 5.00% FY29-FY30 5.16% 4.94% 4.94% IY29-IY30 5.14% 4.93% 4.93% FY30-FY31 5.05% 4.87% 4.87% IY30-IY31 5.04% 4.86% 4.86% FY31-FY32 4.95% 4.80% 4.80% IY31-IY32 4.93% 4.79% 4.79% FY32-FY33 4.84% 4.73% 4.73% IY32-IY33 4.82% 4.71% 4.71% FY33-FY34 4.73% 4.65% 4.65% IY33-IY34 4.71% 4.64% 4.64% FY34-FY35 4.63% 4.58% 4.58% IY34-IY35 4.61% 4.57% 4.57% FY35-FY36 4.52% 4.51% 4.51% IY35-IY36 4.50% 4.50% 4.50% FY36-FY37 4.50% 4.50% 4.50% Subsequent 4.50% 4.50% 4.50% Subsequent 4.50% 4.50% 4.50% Medicare Eligible Insurance Year Trends Medicare Eligible Fiscal Year Trends Retiree Contribution Trend Same as Health Care Trend Mortality Disability Rates IMRF Employees: Rates from the December 31, 2020 IMRF Actuarial Valuation Report IMRF Employees and Retirees: Rates from the December 31, 2020 IMRF Actuarial Valuation Report Active Employees: PubG.H-2010(B) Mortality Table - General (below median income) with future mortality improvements using Scale MP-2020 Retirees: PubG.H-2010(B) Mortality Table - General (below-median income). Male adjusted 106% and Female adjusted 105% tables, with future mortality improvements using scale MP-2020 Police Employees and Retirees: PubS.H-2010 Mortality Table - Safety with future mortality improvements using Scale MP-2020. Police Employees: Rates from the City of McHenry Police Pension Fund Actuarial Valuation for the Year Beginning May 1, 2020 Starting Per Capita Costs Age Retiree Spouse 50 10,450$ 11,783$ 52 11,303 12,745 55 12,714 14,336 57 13,751 15,506 60 15,468 17,442 62 16,731 18,866 64 18,096 20,405 65 4,871 4,871 67 5,167 5,167 70 5,619 5,619 75 6,326 6,326 80 6,985 6,985 85+ 7,712 7,712 BCBS HMO NOTES TO FINANCIAL STATEMENTS (Continued) Page 46 Age Retiree Spouse Retiree Spouse 50 13,011$ 14,671$ 10,815$ 12,195$ 52 14,073 15,869 11,698 13,190 55 15,830 17,850 13,158 14,837 57 17,121 19,307 14,232 16,048 60 19,259 21,717 16,009 18,052 62 20,831 23,489 17,315 19,525 64 22,531 25,406 18,728 21,118 Retiree Contributions Retiree Spouse BCBS HMO 8,259$ 9,313$ BCBS PPO 10,283 11,595 PPO-HRA 8,547 9,638 Election at Retirement 10% of active employees are assumed to elect coverage at retirement Marital Status 70% of active employees are assumed to be married and elect spousal coverage upon retirement. Males are assumed to be three years older than females. BCBS PPO PPO-HRA There is no long-term expected rate of return on OPEB plan investments because the City does not have a trust dedicated exclusively to the payment of OPEB benefits. Decrements were changed to those in each of the most recent IMRF and Police Pension Fund valuation reports. Discount Rate The City does not have a dedicated trust to pay retiree healthcare benefits. Per GASB 75, the discount rate should be a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale). A rate of 1.83% is used, which is the S&P Municipal Bond 20-Year High-Grade Rate Index as of April 30, 2021. Changes in the Total OPEB Liability Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability (a) (b) (a) - (b) Balances at April 30, 2020 5,900,815$ -$ 5,900,815$ Changes for the year: Service Cost 38,278$ -$ 38,278$ Interest on Total OPEB Liability 165,119 - 165,119 Difference between Expected & Actual Experience (646,028) - (646,028) Assumption Changes 473,547 - 473,547 Benefit Payments (214,301) - (214,301) Net Changes (183,385)$ -$ (183,385)$ Balances at April 30, 2021 5,717,430$ -$ 5,717,430$ Increase/(Decrease) Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage-point lower or 1 percentage-point higher than the current discount rate: 1% Increase Valuation Rate 1% Decrease 4,548,847$ 5,717,430$ 7,348,388$ Plan's Total OPEB Liability/(Asset) NOTES TO FINANCIAL STATEMENTS (Continued) Page 47 Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1 percentage-point higher than the current healthcare cost trend rates: Healthcare Cost 1% Increase Valuation Rate 1% Decrease 7,312,282$ 5,717,430$ 4,543,820$ Plan's Total OPEB Liability/(Asset) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the fiscal year ended April 30, 2021, the City recognized OPEB expense of $175,298. At April 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Net Inflows of Resources Resources of Resources Differences Between Expected and Actual Experience -$ 1,308,834$ (1,308,834)$ Changes of Assumptions 1,952,938 810,051 1,142,887 Total 1,952,938$ 2,118,885$ (165,947)$ Changes in total OPEB liability related to the difference in actual and expected experience, or changes in assumptions regarding future events, are recognized in OPEB expense over the expected remaining service life of all employees (9.6 years, active and retired) in the postretirement plan. Amounts reported as deferred outflows of resources related to OPEB will be recognized as future OPEB expense as follows: Year ending April 30 Net Inflows of Resources 2022 (28,099)$ 2023 (28,099) 2024 (28,099) 2025 (28,099) 2026 (28,099) 2027-2030 (25,452) (165,947)$ B. Social Security All employees are covered under Social Security. The City paid the total required contribution for the current fiscal year. NOTE 14 - INTERFUND BALANCES AND TRANSFERS Interfund balances at April 30, 2021 consisted of the following: Due From Due To Amount General Fund Water and Sewer Fund 146,869$ General Fund Police Pension Fund 418 NOTES TO FINANCIAL STATEMENTS (Continued) Page 48 The above interfund balances resulted from a time lag between the dates that (1) revenue was collected and remitted to the appropriate funds and (2) expenditures were incurred and reimbursed between funds. Interfund transfers for the year ended April 30, 2021 consisted of the following: Transfer From Transfer To Amount Water and Sewer Fund Nonmajor Governmental Funds 93,780$ General Fund Nonmajor Governmental Funds 327,127 Transfers are used to (1) move revenues from the fund that is required to collect them to the fund that is required to expend them, and (2) move receipts restricted to debt service from the funds collecting the receipts to the Debt Service Fund as debt service payments become due. NOTE 15 - RISK MANAGEMENT The City is exposed to various risks related to torts; theft of, damage to, and destruction of assets; errors and omissions; and injuries to employees. The City is a member of the McHenry County Municipal Risk Management Agency (MCMRMA), a public entity risk pool through which property, general liability, automobile liability, crime, excess property, excess liability, and boiler and machinery coverage is provided in excess of specified limits for the members, acting as a single insurable unit. The relationship between the City and MCMRMA is governed by a contract and by-laws that have been adopted by resolution of each unit’s governing body. The City is contractually obligated to make all annual and supplementary contributions for MCMRMA, to report claims on a timely basis, cooperate with MCMRMA, its claims administrator and attorneys in claims investigation and settlement, and to follow risk management procedures as outlined by MCMRMA. Members have a contractual obligation to fund any deficit of MCMRMA attributable to a membership year during which they were a member. MCMRMA is responsible for administering the self-insurance program and purchasing excess insurance according to the direction of the Board of Directors. MCMRMA also provides its members with risk management services, including the defense of and settlement of claims, and establishes reasonable and necessary loss of reduction and prevention procedures to be followed by the members. During fiscal year 2021 there was no significant reduction in insurance coverage for any category. There have been no settlement amounts that have exceeded insurance coverage. The City is insured under a retrospectively-rated policy for workers’ compensation coverage. Whereas the initial premium may be adjusted based on actual experience. Adjustments in premiums are recorded when paid or received. During the year ended April 30, 2021, there were no significant adjustments in premiums based on actual experience. NOTE 16 - CONSTRUCTION COMMITMENTS At any point in time the City is involved in numerous construction contracts. For the governmental activities, there were contract commitments in place for various road projects as well as streetscape planning services as of April 30, 2021 totaling $394,131. Beginning in May 2021 the City has a contract commitment in place for various road projects for $1,635,065. For the Water and Sewer Fund as of April 30, 2021, there were contract commitments in place for demolition at the Central Wastewater Treatment Plant totaling $255,408. NOTE 17 - CONTINGENCIES There is no outstanding litigation which may have a materially adverse effect on the City’s financial position. NOTES TO FINANCIAL STATEMENTS (Continued) Page 49 NOTE 18 - LEGAL DEBT LIMITATION The Illinois Compiled Statutes limits the amount of indebtedness to 8.625% of the most recent available equalized assessed valuation (EAV) of the City. 2020 EAV 743,912,520$ X 8.625% Debt Margin 64,162,455$ Current Debt 34,281,882 Remaining Debt Margin 29,880,573$ NOTE 19 - TAX ABATEMENT AGREEMENTS The City negotiates property and sales tax abatement agreements on an individual basis. All abatement agreements are entered into under the authority of the Mayor, City Clerk, and City Council. The City has tax abatement agreements with various entities as of April 30, 2021 as follows: Name of Eligibility Criteria Amount of Taxes Abatement Type of Taxes and Mechanism Abated During Agreement Abated of Abatement the Fiscal Year Gary Lang Business District Development Agreement Sales taxes First $450,000 in sales tax revenues generated within the Business District Property are retained by the City, 100% of the sales tax revenue generated within the Business District Property between $450,000 and $750,000 annually shall be rebated to Gary Lang, 60% of sales tax revenue generated within the Business District Property above $750,000 shall be rebated to Gary Lang. The total rebate for the year cannot exceed 55% of the total annual sales tax revenue generated with the Business District Property. The total rebate payments cannot exceed $8,441,377.04 or 20 years. 549,957$ 1110 N Green LLC Redevelopment Agreement TIF property taxes Rebate 100% of the TIF Increment assessed up to $624,028.-$ McHenry Commons Shopping Center Economic Incentive Agreement Sales taxes Rebate 100% of base sales tax received by the State attributable to the gross sales generated at the Hobby Lobby Store. The total rebate payments cannot exceed $677,500 or 20 years. 35,340$ CVS Pharmacy Economic Incentive Agreement Sales taxes Rebate 50% of sales tax revenues generated by CVS Pharmacy in calendar years 2016 through 2020 and 25% of sales tax revenues generated by CVS Pharmacy in calendar years 2021 through 2025. The total rebate payments cannot exceed $175,000. 23,498$ Tea Olive, I LLC Sales taxes Rebate 100% of base sales tax received by the State attributable to the gross sales generated at the Big R Store. The total rebate payments cannot exceed $400,000 and end December 31, 2020. 29,973$ 3017 Route 120 & Northwest Suburban Auto Group Economic Incentive Agreement Sales taxes Rebate 50% of base sales tax in calendar years 2017 through 2021 and 25% of base sales tax in calendar years 2022 through 2026 received by the State attributable to the gross sales generated at Northwest Suburban Auto Group. The total rebate payments cannot exceed $150,000. 35,988$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 50 Name of Eligibility Criteria Amount of Taxes Abatement Type of Taxes and Mechanism Abated During Agreement Abated of Abatement the Fiscal Year McHenry Donuts, Inc. Economic Incentive Agreement Sales taxes Rebate 100% of Non-Home Rule Sales taxes in 2017 through 2026 up to $62,500.12,100$ Sunnyside Auto Finance Company Economic Incentive Agreement Sales taxes Rebate percentage during years 2017-2019 75% above $66,212. Years 2020-2027 50% above $66,212. Years 2028-2036 25% above $66,212. Not to exceed $300,000. 26,506$ Curt Ames DBA Chain O'Lakes Brewing Company Redevelopment Agreement TIF Property Taxes Rebate 100% of the TIF Increment assessed up to $17,585. -$ Seth Wagner and Associates Real Estate Company Property Tax Abatement Agreement Property Taxes Abate real estate taxes levied against the subject property each year that the taxing body's property taxes exceed the dollar amount from the 2014 base property tax year ($3,458.64) through December 31, 2026. 5,369$ Boone Creek Crossing LLC Redevelopment Agreement TIF Property Taxes Rebate 100% of the TIF Increment assessed up to $25,000 10,237$ Graham Enterprise Inc Economic Incentive Agreement Sales taxes Rebate 50% of base and home rule sales tax received above $1,666.67 per month by the State attributable to the gross sales generated at McHenry BP sites at 5301 Bull Valley Road and 5520 W. Elm Street. The total rebate payments cannot exceed $1,000,000 and end December 31,2039. These rebates do not begin until buildings are torn down at 5301 Bull Valley Road, 5520 W. Elm St, and 4410 W. Elm St; and a new building is built at 5301 Bully Valley Road. 59,975$ BPI, Break Parts Inc LLC Property Tax Abatement Agreement Property Taxes 10-year 100% abatement over and above the 2018 taxes commencing with the 2019 tax bill payable in 2020 through the 2028 tax bill payable in 2029. 12,384$ RR McHenry LLC Economic Incentive Agreement Sales taxes Rebate 50% of base and home rule sales tax received by the State attributable to the property at the NW corner of IL Route 120 and Chapel Hill Road, excluding the Riverside Chocolate Factory parcel. The total rebate payments cannot exceed $1,000,000 and end after the 20th Sales Tax Incentive Year. -$ NOTE 20 - SUBSEQUENT EVENTS Since March 2020, the COVID-19 outbreak in the United States has created disruptions in various governments and has continued to impact these organizations. The City was not significantly impacted during the year ended April 30, 2021. However, the extent of any additional impact on the City is uncertain and cannot be reasonably estimated at this time. Through the American Rescue Plan Act, the City was eligible and have begun to receive monies in fiscal year 2022. The total max amount to be received is $3,678,786 from the Coronavirus Local Fiscal Recovery Fund allotment. The City plans to use these funds for water line relocation over multiple future years. NOTES TO FINANCIAL STATEMENTS (Continued) Page 51 In addition to this, on December 18, 2019, Governor JB Pritzker signed SB1300. The law, a Public Act (P.A.), 101-0610, represents the culmination of more than a decade of work by the Illinois Municipal League (IML). The law consolidates the assets of the state’s more than 650 downstate and suburban public safety pension funds into two consolidated investment funds, one for police officers (Article 3) and one for firefighters (Article 4), which will improve investment returns, eliminate unnecessary and redundant administrative costs, ensure more money is available to fund pension benefits, and reduce the burden on local taxpayers. The law was effective as of January 1, 2020. All pension fund assets, currently reported within the fiduciary fund statements of the Plan, will be transferred to Firefighter’s pension investment fund no later than 30 months after the effective date of the transitions. This is may change the reporting of the Fund as a fiduciary fund in future reporting periods. NOTE 21 - CHANGE IN ACCOUNTING PRINCIPLE The City has implemented GASB Statement No. 84, Fiduciary Activities. This Statement establishes financial reporting standards related to fiduciary activities of the City. Implementation of this standard resulted in no change to the City. REQUIRED SUPPLEMENTARY INFORMATION 4/30/2021*4/30/2020*4/30/2019*4/30/2018*4/30/2017* TOTAL PENSION LIABILITY Service Cost 805,614$ 781,612$ 740,595$ 707,796$ 704,466$ Interest on Total Pension Liability 2,967,915 2,796,732 2,641,076 2,542,116 2,419,748 Differences Between Expected and Actual Experience 680,117 594,214 381,201 646,124 (98,080) Changes of Assumptions (475,311) - 1,199,530 (1,124,675) (136,959) Benefit Payments, Including Refunds of Member Contributions (1,946,703) (1,700,114) (1,543,189) (1,393,390) (1,384,293) Net Change in Total Pension Liability 2,031,632$ 2,472,444$ 3,419,213$ 1,377,971$ 1,504,882$ Total Pension Liability - Beginning 41,507,305 39,034,861 35,615,648 34,237,677 32,732,795 Total Pension Liability - Ending 43,538,937$ 41,507,305$ 39,034,861$ 35,615,648$ 34,237,677$ PLAN FIDUCIARY NET POSITION Contributions - Employer 1,137,523$ 787,631$ 918,212$ 915,963$ 844,878$ Contributions - Member 361,437 344,894 340,841 328,547 366,710 Net Investment Income 5,164,342 5,817,683 (1,672,533) 4,871,136 1,840,322 Benefit Payments, Including Refunds of Member Contributions (1,946,703) (1,700,114) (1,543,189) (1,393,390) (1,384,293) Administrative Expenses 131,829 196,150 493,832 (352,231) 293,436 Net Change in Plan Fiduciary Net Position 4,848,428$ 5,446,244$ (1,462,837)$ 4,370,025$ 1,961,053$ Plan Net Position - Beginning 36,911,378 31,465,134 32,927,971 28,557,946 26,596,893 Plan Net Position - Ending 41,759,806$ 36,911,378$ 31,465,134$ 32,927,971$ 28,557,946$ City's Net Pension Liability 1,779,131$ 4,595,927$ 7,569,727$ 2,687,677$ 5,679,731$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 95.91%88.93%80.61%92.45%83.41% Covered-Valuation Payroll 8,031,924$ 7,718,418$ 7,538,685$ 7,241,274$ 6,362,027$ Employer's Net Pension Liability as a Percentage of Covered-Valuation Payroll 22.15%59.54%100.41%37.12%89.28% * This information presented is based on the actuarial valuation performed as of the December 31 year end prior to the fiscal year end listed above. This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled,information is presented for those information is available. CITY OF MCHENRY, ILLINOIS ILLINOIS MUNICIPAL RETIREMENT FUND SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS APRIL 30, 2021 Page 52 See Accompanying Independent Auditor's Report 4/30/2021*4/30/2020*4/30/2019*4/30/2018*4/30/2017*4/30/2016* Actuarially-Determined Contribution 983,107$ 796,541$ 918,212$ 908,056$ 844,877$ 801,851$ Contributions in Relation to Actuarially-Determined Contribution 1,137,523 787,631 918,212 915,963 844,878 801,851 Contribution Deficiency/(Excess)(154,416)$ 8,910$ -$ (7,907)$ (1)$ -$ Covered Payroll 7,135,984$ 7,780,883$ 7,594,095$ 7,469,026$ 6,362,027$ 6,163,340$ Contributions as a Percentage of Covered Payroll 15.94%10.12%12.09%12.26%13.28%13.01% Notes to Schedule: Actuarially determined contribution rates are calculated as of December 31 each year, which are 12 months prior to the beginning of the fiscal year in which contributions are reported. Remaining Amortization Period: 23-year closed period Price Inflation: 2.50%, approximate; No explicit price inflation assumption is used in this valuation. Retirement Age: Experience-based table of rates that are specific to the type of eligibility condition; last updated for the 2017 valuation pursuant to an experience study of the period 2014 to 2016. Actuarial Cost Method: Aggregate entry age = normal Amortization Method: Level percentage of payroll, closed Asset Valuation Method: 5-year smoothed market; 20% corridor Wage Growth: 3.25% CITY OF MCHENRY, ILLINOIS ILLINOIS MUNICIPAL RETIREMENT FUND SCHEDULE OF EMPLOYER CONTRIBUTION LAST TEN FISCAL YEARS Actuarial Method and Assumptions Used on the Calculation of the 2020 Contribution Rate * Salary Increases: 3.35% to 14.25%, including inflation Investment Rate of Return: 7.25% Mortality:For non-disabled retirees,an IMRF specific mortality table was used with fully generational projection scale MP-2014 (base year 2012).The IMRF specific rates were developed from the RP-2014 Blue Collar Health Annuitant Mortality Table with adjustments to match current IMRF experience.For disabled retirees,an IMRF specific mortality table was used with fully generational projection scale MP- 2014 (base year 2012).The IMRF specific rates were developed from the RP-2014 Disabled Retirees Mortality Table applying the same adjustments that were applied for non-disabled lives.For active members,an IMRF specific mortality table was used with fully generational projection scale MP-2014 (base year 2012).The IMRF specific rates were developed from the RP-2014 Employee Mortality Table with adjustments to match current IMRF experience. *Based on Valuation Assumptions used in the December 31, 2018 actuarial valuation; note two year lag between valuation and rate setting. This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled,information is presented for those years for which information is available. Page 53 See Accompanying Independent Auditor's Report 4/30/2021 4/30/2020 4/30/2019 4/30/2018 4/30/2017 4/30/2016 TOTAL PENSION LIABILITY Service Cost 1,106,282$ 1,020,016$ 964,573$ 969,843$ 906,395$ 948,282$ Interest 3,687,359 3,400,174 3,244,523 3,100,186 3,130,927 2,940,204 Changes in Benefit Terms - 267,927 - - - - Differences Between Expected and Actual Experience (143,994) 953,997 165,685 (13,601) (1,315,850) (531,862) Changes in Assumptions - 1,039,838 - - (1,259,209) 4,137,023 Benefit Payments, Including Refunds of Member Contributions (2,441,099) (2,225,355) (2,077,032) (1,911,914) (1,890,931) (2,046,745) Net Change in Total Pension Liability 2,208,548$ 4,456,597$ 2,297,749$ 2,144,514$ (428,668)$ 5,446,902$ Total Pension Liability - Beginning 54,143,186 49,686,589 47,388,840 45,244,326 45,672,994 40,226,092 Total Pension Liability - Ending 56,351,734$ 54,143,186$ 49,686,589$ 47,388,840$ 45,244,326$ 45,672,994$ PLAN FIDUCIARY NET POSITION Contributions - Employer 26,150,315$ 2,077,704$ 2,017,300$ 1,868,798$ 1,521,914$ 1,386,205$ Contributions - Member 469,279 500,202 427,378 409,415 397,515 513,111 Contributions - Other 435,068 - 1,221 - - - Net Investment Income 9,474,445 249,889 1,454,043 2,225,784 2,041,694 (228,847) Benefit Payments, Including Refunds of Member Contributions (2,441,099) (2,225,355) (2,077,032) (1,911,914) (1,890,931) (2,046,745) Administrative Expenses (25,668) (100,204) (17,813) (18,717) (41,164) (29,539) Net Change in Plan Fiduciary Net Position 34,062,340$ 502,236$ 1,805,097$ 2,573,366$ 2,029,028$ (405,815)$ Plan Net Position - Beginning 27,655,865 27,153,629 25,348,532 22,775,166 20,746,138 21,151,953 Plan Net Position - Ending 61,718,205$ 27,655,865$ 27,153,629$ 25,348,532$ 22,775,166$ 20,746,138$ City's Net Pension Liability (5,366,471)$ 26,487,321$ 22,532,960$ 22,040,308$ 22,469,160$ 24,926,856$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 109.52%51.08%54.65%53.49%50.34%45.42% Covered-Employee Payroll 4,686,805$ 4,444,767$ 4,224,124$ 4,204,784$ 4,082,315$ 3,880,748$ Employer's Net Pension Liability as a Percentage of Covered-Employee Payroll -114.50%595.92%533.44%524.17%550.40%642.32% 2021 2020 2019 2018 2017 2016 Annual Money-Weighted Rate of Return, Net of Investment Expenses 32.11%-0.48%5.73%9.60%5.60%-1.53% This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled,information is presented for those years for whic available. CITY OF MCHENRY, ILLINOIS POLICE PENSION PLAN SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS APRIL 30, 2021 Page 54 See Accompanying Independent Auditor's Report 4/30/2021 4/30/2020 4/30/2019 4/30/2018 4/30/2017 4/30/2016 4/30/2015 Actuarially-Determined Contribution 2,231,742$ 2,082,421$ 2,019,703$ 1,874,219$ 1,524,244$ 1,387,374$ 1,295,577$ Contributions in Relation to Actuarially-Determined Contribution 26,150,315 2,077,704 2,017,300 1,868,798 1,521,914 1,386,205 1,295,101 Contribution Deficiency/(Excess)(23,918,573)$ 4,717$ 2,403$ 5,421$ 2,330$ 1,169$ 476$ Covered-Employee Payroll 4,686,805$ 4,422,539$ 4,324,167$ 4,291,809$ 4,082,315$ 3,880,748$ 3,791,467$ Contributions as a Percentage of Covered-Employee Payroll 557.96%46.98%46.65%43.54%37.28%35.72%34.16% Notes to Schedule: Salary Increases: 4.00% to 10.27%, including inflation This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years for which information is available. Actuarial Method and Assumptions Used on the Calculation of the 2020 Contribution Rate * Actuarial Cost Method: Aggregate entry age = normal Amortization Method: Level percentage of payroll, closed Termination Rates: 100% of L&A 2016 Illinois Police Termination Rates Disability Rates: 100% of L&A 2016 Illinois Police Disability Rates *Based on Valuation Assumptions used in the May 1, 2019 actuarial valuation Investment Rate of Return: 7.00% Retirement Age: 100% of L&A 2016 Illinois Police Retirement Rates Capped at Age 65 Remaining Amortization Period: 21-year closed period Asset Valuation Method: 5-year smoothed market; 20% corridor Wage Growth: 3.00% Price Inflation: 2.50%, approximate; No explicit price inflation assumption is used in this valuation. CITY OF MCHENRY, ILLINOIS POLICE PENSION PLAN SCHEDULE OF EMPLOYER CONTRIBUTION LAST TEN FISCAL YEARS This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled,information is presented for those years for which information is available. Page 55 See Accompanying Independent Auditor's Report 4/30/2021 4/30/2020 4/30/2019 TOTAL OPEB LIABILITY Service Cost 38,278$ 36,378$ 32,964$ Interest 165,119 171,790 209,775 Differences Between Expected and Actual Experience - - (1,070,724) Benefit Payments (214,301) (162,019) (167,232) Changes in Assumptions 473,546 513,575 417,482 Other Changes (646,027) (91,626) 147,912 Net Change in Total OPEB Liability (183,385)$ 468,098$ (429,823)$ Total OPEB Liability - Beginning 5,900,815 5,432,717 5,862,540 Total OPEB Liability - Ending 5,717,430$ 5,900,815$ 5,432,717$ Covered-Employee Payroll 9,342,565$ 8,796,233$ *8,796,233$ Employer's Net OPEB Liability as a Percentage of Covered-Valuation Payroll 61.20%67.08%61.76% Notes to Schedule: The following are the discount rates used in each period:1.83%3.21%3.21% No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled, information is presented for those years for which information is available. Changes of Assumptions.Changes of assumptions and other inputs reflect the effects of changes in the discount rate of each period. There is no actuarially-determined contribution (ADC)or employer contribution in relation to the ADC as the total OPEB liabilities are currently an unfunded obligation. * - Covered-Employee Payroll is the same as the prior year due to the valuation being a rollforward instead of a new valuation. CITY OF MCHENRY OTHER POST-EMPLOYMENT BENEFIT SCHEDULE OF CHANGES IN THE EMPLOYER'S TOTAL OPEB LIABILITY AND RELATED RATIOS APRIL 30, 2021 Page 56 See Accompanying Independent Auditor's Report Actual Original Final Amounts REVENUES Local Taxes Property Tax 4,950,359$ 4,950,359$ 4,940,218$ Intergovernmental State Sales Tax 11,057,997 11,057,997 11,727,968 State Income Tax 2,834,160 2,834,160 3,276,353 State Replacement Tax 65,000 65,000 78,561 State Pull Tab/Games Tax 1,000 1,000 893 Inter Track Wagering Tax 40,000 40,000 16,080 State Telecommunications Tax 280,000 280,000 244,938 Cannabis Use Tax - - 23,883 Federal Grants - - 1,354,713 Other Local Sources Hotel/Motel Tax 173,000 173,000 81,358 Franchise Fees 340,000 340,000 360,325 Licenses and Permits 820,000 820,000 957,091 Fines and Forfeitures 495,000 495,000 370,906 Charges for Services 1,316,789 1,316,789 1,025,406 Interest 147,250 147,250 16,097 Local Grants - - 31,239 Miscellaneous Rent 18,000 18,000 18,694 Royalties 175,000 175,000 175,000 Donations - - 750 Annexation Fees 150,000 150,000 249,361 Reimbursements 2,205,773 2,205,773 2,347,323 Other Miscellaneous 83,200 83,200 2,367 Total Revenues 25,152,528$ 25,152,528$ 27,299,524$ EXPENDITURES Current General Office Administration 1,143,014$ 1,202,169$ 1,475,753$ Elected Officials 94,226 94,226 84,839 Community Development 988,849 988,849 959,169 Finance Department 1,365,772 1,365,772 1,327,818 Human Resources 262,174 262,174 245,127 Economic Development 299,742 299,742 287,321 4,153,777$ 4,212,932$ 4,380,027$ Public Safety Police Commission 6,953$ 6,953$ 5,855$ Police Department 10,664,875 10,664,875 34,321,116 Dispatch Center 2,597,255 2,597,255 2,593,153 13,269,083$ 13,269,083$ 36,920,124$ Public Works Administration 426,317$ 426,317$ 422,889$ Street Department 3,363,817 3,363,817 2,932,488 3,790,134$ 3,790,134$ 3,355,377$ Parks and Recreation Parks and Recreation 2,564,067$ 2,564,067$ 2,173,581$ 2,564,067$ 2,564,067$ 2,173,581$ Budgeted Amounts CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2021 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Page 57 See Accompanying Independent Auditor's Report Actual Original Final Amounts Budgeted Amounts CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2021 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL EXPENDITURES (Continued) Capital Outlay General Office Administration 1,296,500$ 1,296,500$ 550,418$ Public Safety Police Department 8,900 8,900 288,482 Public Works Street Department - - 683,353 Parks and Recreation Parks and Recreation - - 221,898 Unallocated 75,000 75,000 - 1,380,400$ 1,380,400$ 1,744,151$ Debt Service Principal 406,000$ 406,000$ 303,553$ Interest and Fees 11,000 11,000 8,235 417,000$ 417,000$ 311,788$ Total Expenditures 25,574,461$ 25,633,616$ 48,885,048$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES (421,933)$ (481,088)$ (21,585,524)$ OTHER FINANCING SOURCES/(USES) Transfers (327,127)$ (327,127)$ (327,127)$ Proceeds from Loan - - 1,128,524 Proceeds from Bond - - 24,265,000 Sale of City Property 10,000 10,000 28,350 (317,127)$ (317,127)$ 24,759,315$ NET CHANGE IN FUND BALANCE (739,060)$ (798,215)$ 3,173,791$ FUND BALANCE - MAY 1, 2020 8,966,742 FUND BALANCE - APRIL 30, 2021 12,140,533$ Page 58 See Accompanying Independent Auditor's Report Page 59 CITY OF MCHENRY, ILLINOIS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION APRIL 30, 2021 NOTE 1 - BUDGET Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual budgets are adopted for all funds except agency funds. All annual budgets lapse at fiscal year-end. Budgeted expenditures are controlled at the departmental level with the City Administrator’s oversight. All transfers and any revision that changes the total expenditures not contemplated of any fund must be approved by the City Council. All budget amendments must be approved by the City Council. The budget was approved on April 20, 2020 and was amended November 2, 2020 and November 16, 2020. NOTE 2 - EXCESS OF EXPENDITURES OVER BUDGET For the year ended April 30, 2021, the General Fund presented as Required Supplementary Information had expenditures that exceeded budget, as noted in Note 10 to the financial statements. SUPPLEMENTAL FINANCIAL INFORMATION Civil Revolving Total General Annexation Alarm Board Band Defense Loan Tourism General Fund Fund Fund Fund Fund Fund Fund Fund ASSETS Cash and Cash Equivalents 7,157,152$ 876,183$ 876,919$ 23,060$ 8,640$ 146,159$ 116,094$ 9,204,207$ Investments 141,147 20,230 - 1,583 - 3,680 16,528 183,168 Prepaid Items 35,447 - - - - - - 35,447 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 562,380 6,450 14,130 - - 163,606 - 746,566 Accounts Receivable - Unbilled 114,181 - 36,360 - - - 9,236 159,777 Property Taxes 4,865,646 - - - - - - 4,865,646 Accrued Interest 177 25 - 2 - 760 21 985 Due from Other Governmental Units 3,495,008 - - - - - - 3,495,008 Cable Franchise Fee Receivable 124,721 - - - - - - 124,721 TOTAL ASSETS 16,495,859$ 902,888$ 927,409$ 24,645$ 8,640$ 314,205$ 141,879$ 18,815,525$ LIABILITIES Accounts Payable and Accrued Expenses 936,712$ -$ 57,384$ -$ -$ 13,187$ 12,000$ 1,019,283$ Due to Other Governmental Units - 79,849 - - - - - 79,849 Due to Other Funds 147,287 - - - - - - 147,287 Unearned Revenue 562,927 - - - - - - 562,927 TOTAL LIABILITIES 1,646,926$ 79,849$ 57,384$ -$ -$ 13,187$ 12,000$ 1,809,346$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 4,865,646$ -$ -$ -$ -$ -$ -$ 4,865,646$ TOTAL DEFERRED INFLOWS OF RESOURCES 4,865,646$ -$ -$ -$ -$ -$ -$ 4,865,646$ FUND BALANCES Nonspendable 35,447$ -$ -$ -$ -$ -$ -$ 35,447$ Assigned for: Alarm - - 870,025 - - - - 870,025 Tourism - - - - - - 129,879 129,879 Band - - - 24,645 - - - 24,645 Capital Projects - 823,039 - - - - - 823,039 Revolving Loan - - - - - 301,018 - 301,018 Civil Defense - - - - 8,640 - - 8,640 Unassigned 9,947,840 - - - - - - 9,947,840 TOTAL FUND BALANCES 9,983,287$ 823,039$ 870,025$ 24,645$ 8,640$ 301,018$ 129,879$ 12,140,533$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 16,495,859$ 902,888$ 927,409$ 24,645$ 8,640$ 314,205$ 141,879$ 18,815,525$ CITY OF MCHENRY, ILLINOIS COMBINING BALANCE SHEET - GENERAL FUND APRIL 30, 2021 Page 60 See Accompanying Independent Auditor's Report Alarm Civil Revolving Total Annexation Board Band Defense Loan Tourism General General Fund Fund Fund Fund Fund Fund Fund Fund REVENUES Local Taxes Property Tax 4,940,218$ -$ -$ -$ -$ -$ -$ 4,940,218$ Intergovernmental State Sales Tax 11,727,968 - - - - - - 11,727,968 State Income Tax 3,276,353 - - - - - - 3,276,353 State Replacement Tax 78,561 - - - - - - 78,561 State Pull Tab/Games Tax 893 - - - - - - 893 Inter Track Wagering Tax 16,080 - - - - - - 16,080 State Telecommunications Tax 244,938 - - - - - - 244,938 Cannabis Use Tax 23,883 23,883 Federal Grants 1,354,713 - - - - - - 1,354,713 Other Local Sources Hotel/Motel Tax - - - - - - 81,358 81,358 Franchise Fees 360,325 - - - - - - 360,325 Licenses and Permits 957,091 - - - - - - 957,091 Fines and Forfeitures 370,906 - - - - - - 370,906 Charges for Services 806,640 - 218,766 - - - - 1,025,406 Interest 14,924 82 144 5 4 770 168 16,097 Local Grants 31,239 - - - - - - 31,239 Miscellaneous Rent 18,694 - - - - - - 18,694 Royalties - 175,000 - - - - - 175,000 Donations 750 - - - - - - 750 Annexation Fees - 249,361 - - - - - 249,361 Reimbursements 2,347,323 - - - - - - 2,347,323 Other Miscellaneous 2,309 - - 58 - - - 2,367 Total Revenues 26,573,808$ 424,443$ 218,910$ 63$ 4$ 770$ 81,526$ 27,299,524$ EXPENDITURES Current General Office Administration 1,212,896$ 249,161$ -$ -$ -$ -$ 13,696$ 1,475,753$ Elected Officials 84,839 - - - - - - 84,839 Community Development 959,169 - - - - - - 959,169 Finance Department 1,327,818 - - - - - - 1,327,818 Human Resources 245,127 - - - - - - 245,127 Economic Development 287,321 - - - - - - 287,321 4,117,170$ 249,161$ -$ -$ -$ -$ 13,696$ 4,380,027$ Public Safety Police Commission 5,855$ -$ -$ -$ -$ -$ -$ 5,855$ Police Department 34,243,373 - 74,543 - 3,200 - - 34,321,116 Dispatch Center 2,593,153 - - - - - - 2,593,153 36,842,381$ -$ 74,543$ -$ 3,200$ -$ -$ 36,920,124$ Public Works Administration 422,889$ -$ -$ -$ -$ -$ -$ 422,889$ Street Department 2,932,488 - - - - - - 2,932,488 3,355,377$ -$ -$ -$ -$ -$ -$ 3,355,377$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND FOR THE YEAR ENDED APRIL 30, 2021 Page 61 See Accompanying Independent Auditor's Report Alarm Civil Revolving Total Annexation Board Band Defense Loan Tourism General General Fund Fund Fund Fund Fund Fund Fund Fund CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND FOR THE YEAR ENDED APRIL 30, 2021 EXPENDITURES (Continued) Current (Continued) Parks and Recreation Parks and Recreation 2,173,581$ -$ -$ -$ -$ -$ -$ 2,173,581$ 2,173,581$ -$ -$ -$ -$ -$ -$ 2,173,581$ Capital Outlay General Office Administration 550,418$ -$ -$ -$ -$ -$ -$ 550,418$ Public Safety Police Department 288,482 - - - - - - 288,482 Public Works Street Department 683,353 - - - - - - 683,353 Parks and Recreation Parks and Recreation 221,898 - - - - - - 221,898 1,744,151$ -$ -$ -$ -$ -$ -$ 1,744,151$ Debt Service Principal 244,568$ -$ -$ -$ -$ -$ 58,985$ 303,553$ Interest and Fees - - - - - - 8,235 8,235 244,568$ -$ -$ -$ -$ -$ 67,220$ 311,788$ Total Expenditures 48,477,228$ 249,161$ 74,543$ -$ 3,200$ -$ 80,916$ 48,885,048$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES (21,903,420)$ 175,282$ 144,367$ 63$ (3,196)$ 770$ 610$ (21,585,524)$ OTHER FINANCING SOURCES/(USES) Transfers (233,627)$ (35,000)$ -$ 12,000$ 6,000$ 22,500$ (99,000)$ (327,127)$ Loan Proceeds 1,128,524 - - - - - - 1,128,524 Bond Proceeds 24,265,000 - - - - - - 24,265,000 Bond Issuance Costs (335,432) - - - - - - (335,432) Sale of City Property 28,350 - - - - - - 28,350 24,852,815$ (35,000)$ -$ 12,000$ 6,000$ 22,500$ (99,000)$ 24,759,315$ NET CHANGE IN FUND BALANCE 2,949,395$ 140,282$ 144,367$ 12,063$ 2,804$ 23,270$ (98,390)$ 3,173,791$ FUND BALANCE - MAY 1, 2020 7,033,892 682,757 725,658 12,582 5,836 277,748 228,269 8,966,742 FUND BALANCE - APRIL 30, 2021 9,983,287$ 823,039$ 870,025$ 24,645$ 8,640$ 301,018$ 129,879$ 12,140,533$ Page 62 See Accompanying Independent Auditor's Report Special Special Municipal Service Service Total Recreation Capital Capital Debt Motor Motor Developer Area #4 -Area #6 -Other Pageant Audit Center Improvements Equipment Service Fuel Tax Fuel Tax Donations TIF Lakewood Huntersville Governmental Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Funds ASSETS Cash and Cash Equivalents 1,954$ 4,118$ -$ 207,441$ -$ -$ 2,164,041$ 176,072 1,335,839$ 738,606$ -$ -$ 4,628,071$ Deposit with Paying Agent - - - - - 32,870 - - - - - - 32,870 Investments - 501 377,865 99,994 23,713 16,355 - - 64,009 - 402 - 582,839 Inventory - - - - - - 84,000 - - - - - 84,000 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed - - - 6,679 - - - - 5,400 - - - 12,079 Accounts Receivable - Unbilled - - 10,359 - - - - 27,523 - - - - 37,882 Property Taxes - 26,431 - - - - - - - 680,014 16,123 - 722,568 Accrued Interest - 1 473 125 30 20 - - 80 - 1 - 730 Due from Other Governmental Units - - - 8,351 - - 411,144 - 2,702 - - - 422,197 TOTAL ASSETS 1,954$ 31,051$ 388,697$ 322,590$ 23,743$ 49,245$ 2,659,185$ 203,595$ 1,408,030$ 1,418,620$ 16,526$ -$ 6,523,236$ LIABILITIES Accounts Payable and Accrued Expenses -$ -$ 21,391$ 1,141$ -$ 830$ 124,714$ -$ 88,675$ 19,191$ -$ -$ 255,942$ Overdrafts - - 130,434 - 23,421 48,639 - - - - 1,043 179,115 382,652 Due to Other Governmental Units - - - - - - - 77,320 - - - 77,320 TOTAL LIABILITIES -$ -$ 151,825$ 1,141$ 23,421$ 49,469$ 124,714$ -$ 165,995$ 19,191$ 1,043$ 179,115$ 715,914$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes -$ 26,431$ -$ -$ -$ -$ -$ -$ -$ 680,014$ 16,123$ -$ 722,568$ Unavailable Revenue - State Taxes - - - - - - 107,578 - - - - - 107,578 Unavailable Revenue - Rent - - - - - - - 2,400 - - - 2,400 TOTAL DEFERRED INFLOWS OF RESOURCES -$ 26,431$ -$ -$ -$ -$ 107,578$ -$ 2,400$ 680,014$ 16,123$ -$ 832,546$ FUND BALANCES Nonspendable -$ -$ -$ -$ -$ -$ 84,000$ -$ -$ -$ -$ -$ 84,000$ Restricted for: Capital Projects - - - - - - - - 675,404 - - - 675,404 Tax Increment Financing - - - - - - - - - 755,407 - - 755,407 Highways and Streets - - - - - - 1,473,070 203,595 - - - - 1,676,665 Assigned for: Audit - 4,620 - - - - - - - - - - 4,620 Highways and Streets - - - - - - 869,823 - - - - - 869,823 Capital Projects - - - 321,449 322 - - - 564,231 - - - 886,002 Parks and Recreation 1,954 - 236,872 - - - - - - - - - 238,826 Debt Service - - - - - - - - - - - - - Special Service Areas - - - - - - - - - - - - - Unassigned - - - - - (224) - - - (35,992) (640) (179,115) (215,971) TOTAL FUND BALANCES 1,954$ 4,620$ 236,872$ 321,449$ 322$ (224)$ 2,426,893$ 203,595$ 1,239,635$ 719,415$ (640)$ (179,115)$ 4,974,776$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 1,954$ 31,051$ 388,697$ 322,590$ 23,743$ 49,245$ 2,659,185$ 203,595$ 1,408,030$ 1,418,620$ 16,526$ -$ 6,523,236$ CITY OF MCHENRY, ILLINOIS COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS APRIL 30, 2021 Page 63 See Accompanying Independent Auditor's Report Special Special Municipal Service Service Total Recreation Capital Capital Debt Motor Motor Developer Area #4 -Area #6 -Other Pageant Audit Center Improvements Equipment Service Fuel Tax Fuel Tax Donations TIF Lakewood Huntersville Governmental Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Funds REVENUES Local Taxes Property Tax -$ 26,299$ -$ -$ -$ -$ -$ -$ -$ 655,428$ 16,123$ -$ 697,850$ Intergovernmental State Motor Fuel Tax - - - - - - 1,034,926 203,595 - - - - 1,238,521 State Grants - - - - - 1,037,679 - - - - - 1,037,679 Federal Grants - - - - - - 70,933 - - - - - 70,933 Bond Interest Rebates - - - - - 3,688 - - - - - - 3,688 Other Local Sources Charges for Services - 13,676 337,721 - - - - - - - - - 351,397 Interest - 3 1,308 1,703 72 60 2,220 - 750 27 1 - 6,144 Miscellaneous - Rent - - 4,298 - - - - - 38,849 - - - 43,147 Donations - - - - - - - - 320,304 - - - 320,304 Reimbursements - - - 48,772 - - - - - 62,860 - - 111,632 Other Miscellaneous 100 - 100 - - - - - 38,520 - - - 38,720 100$ 39,978$ 343,427$ 50,475$ 72$ 3,748$ 2,145,758$ 203,595$ 398,423$ 718,315$ 16,124$ -$ 3,920,015$ EXPENDITURES Current General Office 4$ 43,605$ -$ -$ -$ -$ -$ -$ -$ 18,097$ -$ -$ 61,706$ Public Works - - - - - - 140,108 - - - - - 140,108 Parks and Recreation - - 507,937 - - - - - 169,639 - - - 677,576 Capital Outlay - - - 178,309 - - 620,634 - 477,090 37,571 - - 1,313,604 Debt Service Principal - - - - - 950,000 - - - - - - 950,000 Interest and Fees - - - - - 139,112 - - - - - - 139,112 4$ 43,605$ 507,937$ 178,309$ -$ 1,089,112$ 760,742$ -$ 646,729$ 55,668$ -$ -$ 3,282,106$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 96$ (3,627)$ (164,510)$ (127,834)$ 72$ (1,085,364)$ 1,385,016$ 203,595$ (248,306)$ 662,647$ 16,124$ -$ 637,909$ OTHER FINANCING SOURCES/(USES) Transfers - - (18,671) (29,000) 29,000 1,080,177 (399,917) - - (223,835) (16,847) - 420,907 NET CHANGE IN FUND BALANCES 96$ (3,627)$ (183,181)$ (156,834)$ 29,072$ (5,187)$ 985,099$ 203,595$ (248,306)$ 438,812$ (723)$ -$ 1,058,816$ FUND BALANCES - MAY 1, 2020 1,858 8,247 420,053 478,283 (28,750) 4,963 1,441,794 - 1,487,941 280,603 83 (179,115) 3,915,960 FUND BALANCES - APRIL 30, 2021 1,954$ 4,620$ 236,872$ 321,449$ 322$ (224)$ 2,426,893$ 203,595$ 1,239,635$ 719,415$ (640)$ (179,115)$ 4,974,776$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED APRIL 30, 2021 Page 64 See Accompanying Independent Auditor's Report Capital Utility Marina Total Water/Sewer Development Improvements Operations Water and Fund Fund Fund Fund Sewer Funds ASSETS Current Assets Cash and Cash Equivalents 4,892,646$ 2,910,471$ -$ 356,486$ 8,159,603$ Investments 428,301 258,756 482,847 99,575 1,269,479 Prepaid Items 36,369 - - - 36,369 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 564,531 - - - 564,531 Accounts Receivable - Unbilled 740,240 - - - 740,240 Accrued Interest 1,052 641 1,043 244 2,980 Due from Other Governmental Units 622,714 - - - 622,714 Due from Other Funds 42,656 104,213 - - 146,869 7,328,509$ 3,274,081$ 483,890$ 456,305$ 11,542,785$ Non-Current Assets Capital Assets Land 2,208,117$ -$ -$ -$ 2,208,117$ Buildings 2,736,098 - - - 2,736,098 Systems and Equipment 109,330,726 - - - 109,330,726 Vehicles 1,855,839 - - - 1,855,839 Construction in Progress 38,619 - - - 38,619 Less: Accumulated Depreciation (37,052,254) - - - (37,052,254) 79,117,145$ -$ -$ -$ 79,117,145$ TOTAL ASSETS 86,445,654$ 3,274,081$ 483,890$ 456,305$ 90,659,930$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 555,480$ -$ -$ -$ 555,480$ OPEB Expense/Revenue 107,643 - - - 107,643 TOTAL DEFERRED OUTFLOWS OF RESOURCES 663,123$ -$ -$ -$ 663,123$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 346,606$ -$ -$ 4,996$ 351,602$ Overdraft - - 1,093,558 - 1,093,558 Security Deposits Held - 3,000 - - 3,000 Unearned Revenue 96,675 - - - 96,675 Accrued Interest 271,631 - - - 271,631 IEPA Loan Payable - Current 1,480,962 - - - 1,480,962 Bonds Payable - Current 401,517 - - - 401,517 2,597,391$ 3,000$ 1,093,558$ 4,996$ 3,698,945$ Non-Current Liabilities Compensated Absences 102,097$ -$ -$ -$ 102,097$ IMRF Net Pension Liability 361,888 - - - 361,888 Total OPEB Liability 271,890 - - - 271,890 IEPA Loan Payable (Net of Current Portion Shown Above)28,182,472 - - - 28,182,472 Bonds Payable (Net of Current Portion Shown Above)4,322,327 - - - 4,322,327 33,240,674$ -$ -$ -$ 33,240,674$ TOTAL LIABILITIES 35,838,065$ 3,000$ 1,093,558$ 4,996$ 36,939,619$ DEFERRED INFLOWS OF RESOURCES Pension Revenue/Expense - IMRF 974,505$ -$ -$ -$ 974,505$ OPEB Revenue/Expense 116,789 - - - 116,789 TOTAL DEFERRED INFLOWS OF RESOURCES 1,091,294$ -$ -$ -$ 1,091,294$ NET POSITION Net Investment in Capital Assets 44,729,867$ -$ -$ -$ 44,729,867$ Unrestricted/(Deficit)5,449,551 3,271,081 (609,668) 451,309 8,562,273 TOTAL NET POSITION 50,179,418$ 3,271,081$ (609,668)$ 451,309$ 53,292,140$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION WATER AND SEWER FUNDS APRIL 30, 2021 Page 65 See Accompanying Independent Auditor's Report Capital Utility Marina Total Water/Sewer Development Improvements Operations Water and Fund Fund Fund Fund Sewer Funds OPERATING REVENUES Charges for Services Customer Fees 4,995,852$ 529,837$ -$ -$ 5,525,689$ Capital Fees 403,444 - - - 403,444 Debt Service Fees 2,667,070 - - - 2,667,070 Penalties 98,149 - - - 98,149 Water Meter Sales 37,025 - - - 37,025 Other 6,810 - - - 6,810 8,208,350$ 529,837$ -$ -$ 8,738,187$ OPERATING EXPENSES Water Department Personnel Salaries 509,026$ -$ -$ -$ 509,026$ Miscellaneous Personnel Expenses 164,615 - - - 164,615 Other Operating Expenses 755,831 - - - 755,831 Depreciation 588,751 - - - 588,751 Sewer Department Personnel Salaries 724,839 - - - 724,839 Miscellaneous Personnel Expenses 276,841 - - - 276,841 Other Operating Expenses 1,727,888 - - 35,875 1,763,763 Depreciation 1,704,349 - - - 1,704,349 Utility Work Department Personnel Salaries 655,726 - - - 655,726 Miscellaneous Personnel Expenses 263,391 - - - 263,391 Other Operating Expenses 78,841 - - - 78,841 7,450,098$ -$ -$ 35,875$ 7,485,973$ OPERATING INCOME/(LOSS)758,252$ 529,837$ -$ (35,875)$ 1,252,214$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 7,377$ 1,081$ 3,650$ 402$ 12,510$ Rental Income 30,000 - - 16,352 46,352 Grant Income 620,556 - 175,000 - 795,556 Interest Rebate Income 7,254 - - - 7,254 Interest and Fees (741,570) - - - (741,570) Bond Issuance Costs (54,046) - - - (54,046) Amortization 39,292 - - - 39,292 Gain/(Loss) on Sale of Fixed Asset (1,239,286) - - - (1,239,286) Donated Public Improvements - Water 2,334,210 - - - 2,334,210 Donated Public Improvements - Sewer 1,745,000 - - - 1,745,000 2,748,787$ 1,081$ 178,650$ 16,754$ 2,945,272$ INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 3,507,039$ 530,918$ 178,650$ (19,121)$ 4,197,486$ TRANSFER WITHIN FUNDS 4,886,046 - (4,886,046) - - TRANSFERS (TO)/FROM OTHER FUNDS (93,851) (16,776) 16,847 - (93,780) CHANGE IN NET POSITION 8,299,234$ 514,142$ (4,690,549)$ (19,121)$ 4,103,706$ NET POSITION - MAY 1, 2020 41,880,184 2,756,939 4,080,881 470,430 49,188,434 NET POSITION - APRIL 30, 2021 50,179,418$ 3,271,081$ (609,668)$ 451,309$ 53,292,140$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION WATER AND SEWER FUNDS FOR THE YEAR ENDED APRIL 30, 2021 Page 66 See Accompanying Independent Auditor's Report Employee Risk Information Total Insurance Management Technology Internal Service Fund Fund Fund Funds ASSETS Current Assets Cash and Cash Equivalents -$ 347,655$ 382,516$ 730,171$ Investments - - 8,269 8,269 Prepaid Items 71,816 - - 71,816 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 749 - - 749 Accounts Receivable - Unbilled - 2,014 - 2,014 Accrued Interest - - 10 10 72,565$ 349,669$ 390,795$ 813,029$ Non-Current Assets Capital Assets Systems and Equipment -$ -$ 660,219$ 660,219$ Less: Accumulated Depreciation - - (445,580) (445,580) -$ -$ 214,639$ 214,639$ TOTAL ASSETS 72,565$ 349,669$ 605,434$ 1,027,668$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF -$ -$ 32,949 32,949$ OPEB Expense / Revenue - - 6,422 6,422 TOTAL DEFERRED OUTFLOWS OF RESOURCES -$ -$ 39,371$ 39,371$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 110$ 130$ 37,645$ 37,885$ Overdrafts 77,063 - - 77,063 Unearned Revenue 85,950 - - 85,950 Capital Lease Payable - Current 24,103 24,103 163,123$ 130$ 61,748$ 225,001$ Non-Current Liabilities Compensated Absences -$ -$ 5,705$ 5,705$ IMRF Net Pension Liability - - 86,905 86,905 Total OPEB Liability - - 22,579 22,579 Lease Payable (Net of Current Portion Shown Above)24,104 24,104 -$ -$ 139,293$ 139,293$ TOTAL LIABILITIES 163,123$ 130$ 201,041$ 364,294$ DEFERRED INFLOWS OF RESOURCES Pension Revenue/Expense - IMRF -$ -$ 57,805$ 57,805$ OPEB Revenue/Expense - - 6,970 6,970 DEFERRED INFLOWS OF RESOURCES -$ -$ 64,775$ 64,775$ NET POSITION Net Investment in Capital Assets -$ -$ 166,432$ 166,432$ Unrestricted/(Deficit)(90,558) 349,539 212,557 471,538 TOTAL NET POSITION (90,558)$ 349,539$ 378,989$ 637,970$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION INTERNAL SERVICE FUNDS APRIL 30, 2021 Page 67 See Accompanying Independent Auditor's Report Employee Risk Information Total Insurance Management Technology Internal Service Fund Fund Fund Funds OPERATING REVENUES Charges for Services 3,390,743$ 715,175$ 872,646$ 4,978,564$ 3,390,743$ 715,175$ 872,646$ 4,978,564$ OPERATING EXPENSES Personnel Salaries -$ -$ 158,902$ 158,902$ Miscellaneous Personnel Expenses 3,394,890 - 67,301 3,462,191 Other Operating Expenses 700 865,796 352,451 1,218,947 Depreciation - - 46,312 46,312 3,395,590$ 865,796$ 624,966$ 4,886,352$ OPERATING INCOME/(LOSS)(4,847)$ (150,621)$ 247,680$ 92,212$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 69 1 34 104 CHANGE IN NET POSITION (4,778)$ (150,620)$ 247,714$ 92,316$ NET POSITION - MAY 1, 2020 (85,780) 500,159 131,275 545,654 NET POSITION - APRIL 30, 2021 (90,558)$ 349,539$ 378,989$ 637,970$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED APRIL 30, 2021 Page 68 See Accompanying Independent Auditor's Report Retained Developmental Personnel Total Escrow Escrow Agency Fund Fund Funds ASSETS Current Assets Cash and Cash Equivalents 6,830$ 54,372$ 61,202$ TOTAL ASSETS 6,830$ 54,372$ 61,202$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses -$ 54,372$ 54,372$ Due to Depositors 6,830 - 6,830 TOTAL LIABILITIES 6,830$ 54,372$ 61,202$ TOTAL NET POSITION -$ -$ -$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION AGENCY FUNDS APRIL 30, 2021 Page 69 See Accompanying Independent Auditor's Report Budgeted Amounts Original Actual and Final Amounts REVENUES Local Taxes Property Tax 700,000$ 655,428$ Other Local Sources Interest 1,000 27 Miscellaneous Reimbursements 1,000 62,860 Total Revenues 702,000$ 718,315$ EXPENDITURES Current General Office 50,000$ 18,097$ Capital Outlay 20,000$ 37,571$ Total Expenditures 70,000$ 55,668$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 632,000$ 662,647$ OTHER FINANCING SOURCES/(USES) Transfers (223,835) (223,835) NET CHANGE IN FUND BALANCE 408,165$ 438,812$ FUND BALANCE - MAY 1, 2020 280,603 FUND BALANCE - APRIL 30, 2021 719,415$ CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2021 SPECIAL REVENUE FUND - TAX INCREMENT FINANCING FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Page 70 See Accompanying Independent Auditor's Report ANNUAL FEDERAL FINANCIAL COMPLIANCE SECTION Page 71 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE To the Mayor and City Council Members City of McHenry McHenry, Illinois Report on Compliance for Each Major Federal Program We have audited City of McHenry’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of City of McHenry’s major federal programs for the year ended April 30, 2021. City of McHenry’s major federal programs are identified in the summary of auditor’s results section of the accompanying Schedule of Findings and Questioned Costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of City of McHenry’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of McHenry’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of City of McHenry’s compliance. Opinion on Each Major Federal Program In our opinion, City of McHenry complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended April 30, 2021. Page 72 Report on Internal Control Over Compliance Management of City of McHenry is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of McHenry’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of McHenry’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. EDER, CASELLA & CO. Certified Public Accountants McHenry, Illinois October 14, 2021 Federal Agency Federal Other Award From Pass-From (Pass-Through Agency)Federal Program CFDA Number Number Through Awards Direct Awards Total Department of Homeland Security Disaster Grants - Public Assistance (via Illinois Emergency Management Agency) (Presidentially Declared Disasters)97.036 FEMA-3435-EM-IL 8,163$ -$ 8,163$ Subtotal CFDA 97.036 8,163$ -$ 8,163$ Total CFDA "97"8,163$ -$ 8,163$ Department of Treasury (via Illinois Department of Commerce & Economic COVID-19 Coronavirus Relief Fund (M)21.019 2433-24354 230,000$ -$ 230,000$ Opportunity)COVID-19 Coronavirus Relief Fund (M)21.019 20-494608 1,113,502 - 1,113,502 Subtotal CFDA 21.019 1,343,502$ -$ 1,343,502$ Total CFDA "21"1,343,502$ -$ 1,343,502$ Department of Agriculture (via Illinois Law Enforcement Training Standards Board)Law Enforcement Agreements 10.704 2383-19106 5,089$ -$ 5,089$ Subtotal CFDA 10.704 5,089$ -$ 5,089$ Total CFDA "10"5,089$ -$ 5,089$ CDBG - Entitlement Grants Cluster Department of Housing and Urban Development Community Development Block (via County of McHenry)Grants/Entitlement Grants 14.218 B19-UC-17-0007 95,556$ -$ 95,556$ Subtotal CFDA 14.218 95,556$ -$ 95,556$ Total CDBG - Entitlement Grants Cluster 95,556$ -$ 95,556$ Total CFDA "14"95,556$ -$ 95,556$ Highway Planning and Construction Cluster Federal Highway Administration, Department of Highway Planning and Construction Transportation (via Illinois Department of (Federal-Aid Highway Program)20.205 18-00084-00-SW 6,103$ -$ 6,103$ Transportation)Highway Planning and Construction (Federal-Aid Highway Program)20.205 20-1005-JOB- P9105919-SECTION- 18-00086-00-BR 61,972 - 61,972 Highway Planning and Construction (Federal-Aid Highway Program)20.205 201501007 3,695 - 3,695 Subtotal CFDA 20.205 71,770$ -$ 71,770$ Total Highway Planning and Construction Cluster 71,770$ -$ 71,770$ Total CFDA "20"71,770$ -$ 71,770$ Total Federal Awards Expended:1,524,080$ -$ 1,524,080$ Expenditures City of McHenry Schedule of Expenditures of Federal Awards by Grant For the Year Ended April 30, 2021 Page 73 Page 74 CITY OF MCHENRY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED APRIL 30, 2021 NOTE 1 - BASIS OF PRESENTATION The Schedule of Expenditures of Federal Awards includes the federal award activity of the City under programs of the federal government for the year ended April 30, 2021. The information in this Schedule is presented in accordance with requirements of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the City. NOTE 2 - SUMMARY OF ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. NOTE 3 - INDIRECT COST RATE The City has elected not to use the 10 percent de minimis indirect rate as allowed under the Uniform Guidance. NOTE 4 - SUBRECIPIENTS The City did not provide federal awards to subrecipients during the year ended April 30, 2021. NOTE 5 - FEDERAL LOANS The City had no federal loans or loan guarantees outstanding at April 30, 2021. NOTE 6 – DONATED PERSONAL PROTECTIVE EQUIPMENT (PPE) (UNAUDITED) The City is the recipient of donated PPE. The fair market value of the PPE at the time of receipt was $10,000. Page 75 CITY OF MCHENRY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED APRIL 30, 2021 1) Summary of auditor’s results: a) The auditor’s report expresses an unmodified opinion on whether the financial statements of the City were prepared in accordance with GAAP. b) No significant deficiencies were reported during the audit of the financial statements. No material weaknesses were reported. c) No instances of noncompliance material to the financial statements of the City, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. d) No significant deficiencies in internal control over major federal award programs were reported during the audit of the financial statements. No material weakness in internal control over major federal award programs were reported. e) The auditor’s report on compliance for the major federal award programs for the City expresses an unmodified opinion on all major federal programs. f) There are no audit findings that are required to be reported in accordance with Uniform Guidance 2 CFR section 200.516(a). g) The major program identified was COVID-19 Coronavirus Relief Fund (CFDA #20.019). h) The dollar threshold to distinguish between Type A and Type B programs was $750,000. i) The City was determined to not be a low-risk auditee. 2) No financial statement findings. 3) There were no findings and questioned costs for federal awards which are required to be reported. Therefore, there is also no corrective action plan required. Page 76 CITY OF MCHENRY SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED APRIL 30, 2021 There were no prior audit findings.